Govt to clear way for Macedon gas project

THE state government has pledged to fast-track new gas specification legislation that is critical for development of BHP Billiton's $1 billion Macedon domestic gas project.

Energy Minister Peter Collier told WA Business News drafting of the already delayed legislation should be completed shortly, enabling a bill to be introduced once parliament resumes sitting in August, after the winter recess.

Without the legislation, BHP cannot proceed with the planned early development of the Macedon project, in waters 40 kilometres north of Exmouth.

Mr Collier announced the proposed legislation as a high priority for the (then) new state government in December last year. However, the seeming lack of progress since then had raised fears that Macedon could be delayed indefinitely, despite its importance to WA's long-term gas security in the wake of the Varanus Island explosion last year.

"We're almost there; it's a very complex proposal in terms of what we're dealing with, but I'm extremely confident that it will be introduced very soon after we resume in August," Mr Collier said. "This is my priority."

Under BHP's early start proposal, Macedon could be approved by the end of the year in order for construction to begin in early 2010 and production to start in 2012, making it one of WA's first major new domestic gas projects in decades.

Macedon contains about 1.2 trillion cubic feet of gas, but is too small to be developed as an LNG project. While its proximity to existing infrastructure leaves it ideally placed to supply WA's domestic market, its lower heating value does not meet the specifications of the Dampier-Bunbury pipeline.

A lower heating value means a greater volume of gas must be shipped to deliver the same amount of energy, effectively reducing the capacity of the pipeline.

Prior to the Varanus explosion, BHP had unsuccessfully lobbied the Economic Regulation Authority to lower the gas specifications for the pipeline for several years, but was blocked by opposition from the pipeline operator and some existing gas shippers.

That opposition has waned since the Varanus incident, subject to acceptable compensation arrangements being agreed to cover the cost of upgrading the pipeline.

Dampier Bunbury Pipeline Transmission chief executive Stuart Hohnen said he was eager to facilitate new sources of gas supply, and was confident acceptable arrangements would be implemented to allow the shipment of Macedon gas.