Premier Colin Barnett has launched a blunt attack on the gas industry, saying it doesn’t understand Australia, had left his government swinging “high and dry” and needed to do more for the domestic market.
Premier Colin Barnett has launched a blunt attack on the gas industry, saying it doesn’t understand Australia, had left his government swinging “high and dry”, and needed to do more for the domestic market.
Mr Barnett reserved his most pointed criticism for the Woodside Petroleum-led Browse joint venture, after it walked away from development of an LNG hub at James Price Point near Broome last year.
“I think the state, under some difficulty, did its job,” he told the Australian Petroleum Production & Exploration Association conference in Perth today.
“The joint venture changed its mind and decided to go offshore in the form of floating LNG.
“Now that is their right, I don’t criticise them for that …. but it does leave government swinging a bit high and dry.”
Woodside has previously stated that it opted for FLNG after concluding the James Price Point option, which attracted widespread community protests, was not commercially viable.
However Mr Barnett, who is generally seen as a strong supporter of the gas industry, likened the situation facing his government to a reverse form of sovereign risk.
“Sometimes people talk in Australia about sovereign risk, well there is an opposite to that, and that is the risk government endures when it pursues in good faith a particular line of project development,” Mr Barnett said.
The premier said he accepted the reality that the Browse joint venture would develop the gas fields through floating LNG.
“There are, however, some further complications,” he added.
Some of the Browse gas is located around the Scott Reef atoll, and is therefore governed by two state government retention leases.
The state government estimates that it owns about 30 per cent of the Torosa gas field and about 15 per cent of the development overall.
Mr Barnett said there was not alignment between the Browse joint venture and government, and made it clear he would use the state retention leases as a bargaining chip.
“I’m sure those issues will be resolved ... but you do have a job in front of you,” he said.
“For the state to renew its retention leases, which we would hope to do, the criteria will be two-fold.”
First, he said, the joint venture must establish a supply base within Western Australia “at a site the government agrees to”.
Secondly, there must be a supply of domestic gas to WA industry, “however that is provided”.
The Commonwealth government has already renewed its five retention leases and Woodside managing director Peter Coleman has played down the risk of the state government refusing to renew its leases.
“The volume of reserves under those leases are quite small,” he said in August last year.
Mr Barnett told the APPEA conference that the industry was technically superb “but I don’t know that you have got your public position right.”
“You should not ignore the silent partner in your projects, it’s not just the JV, it’s also the owner of the resource, which is government on behalf of the people,” Mr Barnett told conference delegates.
The premier praised gas companies for investing in local communities and local infrastructure, but said they didn’t really understand what it meant to get a “licence to operate”.
“You should stop reading those American management books, think a bit broader and think in the context of where you are in the world,’’ Mr Barnett said.
“Your ultimate social licence is not what you might think it is; your ultimate licence is getting agreement and alignment with both the national and state governments.
“That’s the one that counts.”
The premier also criticised the industry for its stance on the east coast, where it is fighting attempts to establish a domestic gas reservation policy, like that in WA.
“It’s a hard narrative to sell, to a community, to a government, that we are going to increase production of gas, and we are going to export it, and in the meantime domestic supplies might be diminished and domestic prices will go up,’’ he said.
“I’m a politician and I’m pretty good at selling a story, but I’d find that a tough one to sell.
“The industry has to have a look at that.
“You can’t say to people that gas production is going up, and by the way, your supplies are going down, and the price is going up.
“That’s a big challenge for the industry.”