State parliament today passed legislation to broaden the gas specifications of the state's main gas pipelines, removing a key obstacle to BHP Billiton's plans to develop the $1 billion Macedon gas project off Exmouth.
State parliament today passed legislation to broaden the gas specifications of the state's main gas pipelines, removing a key obstacle to BHP Billiton's plans to develop the $1 billion Macedon gas project off Exmouth.
The legislation enables major pipelines, such as the Dampier-Bunbury and Parmelia gas pipelines, to transport gas with a lower heating value and more contaminants than existing supplies from major projects such as the North West Shelf.
The broader specifications are vital for the development of new fields, notably Macedon, which do not meet the existing requirements. Because of its lower heating value, more so-called "lean" gas must be shipped to deliver the same volume of contained energy, effectively reducing the capacity of the pipeline. Some pre-1980s gas appliances may also become unsafe if operated using this leaner gas.
State energy minister Peter Collier, who made broadening the specifications a portfolio priority in December last year, said the changes would accelerate development of new gas supplies for the state's domestic market.
"This will benefit customers by leading to greater competition among gas producers and improving energy security through a more diverse range of gas sources," he said.
"Broadening the make-up of gas for the domestic market will encourage developments of gas fields, such as BHP Billiton's Macedon, which currently sits outside specifications for delivery through Western Australia's gas pipeline network."
Mr Collier said a special program would be introduced to service or replace old appliances that would be affected by the delivery of leaner gas. The program would be funded by those gas producers actually responsible for producing leaner gas.
The Macedon project is likely to be the first such field developed following the change in specifications, with BHP evaluating an "early start" option that could see construction begin next year and first production get underway in 2012.
Macedon, 40km north of Exmouth, contains about 1.2 trillion cubic feet of gas, making it too small for LNG production, but sufficient to produce over 200 terajoules a day for the domestic market. That is equivalent to about one fifth of the state's current daily supply.
The legislation's passage was also welcomed by the Australian Petroleum Production & Exploration Association as a move that would help secure long term natural gas supplies for the state.
APPEA WA Director Tom Baddeley said the existing gas quality specifications were among the narrowest in Australia and had long been a barrier to increasing natural gas supply in WA.
Mr Baddeley said the upstream producers' commitment to bear the pipeline and user costs associated with the change were an indication of the industry's commitment to increasing domestic gas supplies and improving the state's long term energy security.
