Gas users seek NWS guarantee

WESTERN Australia’s largest gas users have urged the state government to take direct action to ensure that the Woodside-operated North West Shelf project continues to maintain supplies to WA customers.

The Domgas Alliance, which represents major gas consumers such as Alcoa and Alinta, fears that existing LNG customers will be preferred over domestic buyers as existing supply contracts come up for renewal as the project’s gas reserves dwindle.

Under the project’s three-decade-old state agreement, the shelf partners were required to reserve a minimum of 4.7 trillion cubic feet of gas for supply to the local market.

However, the shelf partners have now met their legislated supply obligations, leaving alliance members nervous as more lucrative long-term LNG supply deals also approach renewal.

Alliance executive director Gavin Goh urged the government to intervene to ensure the shelf partners maintain supplies to domestic customers.

“The North West Shelf Project currently supplies close to 70 per cent of the state’s gas and we need certainty that WA’s energy needs will continue to be met from the project,” Mr Goh told WA Business News.

“We urge the government to ensure domestic supply takes precedence over LNG exports in any future contracts by the North West Shelf partners.”

Mr Goh said the state agreement provided a powerful mechanism for the state to secure domestic supply through to 2025.

Under the agreement, the shelf partners are required to keep the relevant minister informed of their intended plans for gas processed at the plant for the period 2010 to 2025.

Furthermore, it requires the partners to consult with the minister and reach agreement before signing any sale or export agreements for gas during those years, after taking into account the state’s domestic needs and the project’s capacity to meet them on commercial terms.

Woodside confirmed that the partners had met their state agreement supply obligations but that they were still actively marketing gas locally.

“The NWS Venture participants have met and exceeded their gas supply commitments under the state agreement and remain committed to marketing gas to new and existing customers in WA,” a Woodside spokesman said.

He declined to provide any detail of its future supply provisions to either domestic or overseas customers.

“The contracted volumes of gas beyond 2012, as well as the offshore gas supply that may be available to the NWSV, are both confidential and commercially sensitive at this time,” he said.

According to modelling by the Department of Mines and Petroleum, domestic supplies from the shelf could fall by at least a third by 2016 and by as much as two thirds by 2020 under its worst-case scenario.

Premier Colin Barnett declined to comment this week in light of the government’s plan to release its overarching Strategic Energy Initiative by the end of the year.

The alliance has long complained of a dearth of affordable new gas supplies, and accuses producers of warehousing reserves for future export as LNG.

But producers argue WA is undergoing its biggest domestic gas investment boom in decades, with Apache’s Devil Creek project under construction and new LNG projects such as Pluto and Gorgon required to provide some domestic supplies by mid-decade.

Producers also note that development and production costs have risen sharply as more marginal and remote fields are tapped, making higher prices inevitable. Average gas prices in WA still remain on a par with the rest of Australia at around $3.70 a gigajoule.