Reactive domestic gas policy changes by the state government present a threat to stable supply in Western Australia, according to Strike Energy chair John Poynton.
Strike recently moved into gas production when it commissioned the Walyering project in the Perth Basin, and is aggressively pursuing growth by bringing its South and West Erregulla and Ocean Hill projects to production in coming years.
Its plans to accelerate production from its Perth Basin projects are endorsed by the state, which gave the producer lead agency service to help it in its fast-tracking ambitions earlier this year.
But Strike was delivered a blow in August when the government changed its policy around onshore gas production, requiring projects on the state’s main pipeline - including Perth Basin projects - to supply into the domestic market only.
The policy had previously allowed developers to apply for LNG export exemptions, such as that granted to Strike’s Perth Basin neighbour Beach Energy and Mitsui at their Waitsia stage two joint venture project in 2020.
Speaking at Strike’s AGM this morning, Mr Poynton said the move affected the investment case for Strike, which had previously expressed hope of securing an export exemption.
“The WA government recognises the challenges faces in managing a smooth energy transition but unfortunately continues to alter domestic gas policy reactively and in ways that threaten stable future gas supplies,” he said.
“Despite our disappointment over the recent decision to ban the export of Perth Basin gas, we continue to work collaboratively with the government with the aim of creating a domestic gas market that satisfies the needs of customers without undermining or negating the investment case for Strike.”
Despite the setback, Mr Poynton said Strike was committed to its role in securing the state’s domestic gas future as it transitioned away from coal-fired power and focuses on delivering critical minerals.
Strike recently secured gas sales agreements with South32 and AGL Energy, covering around 60 per cent of estimated daily production from its South Erregulla gas field.
The gas supply is proposed from the project’s phase one development, which is targeting production in 2025, and subject to Strike taking an unconditional final investment decision.
Strike also has reserves contracted to Wesfarmers and Santos.
Mr Poynton also touched on the bidding frenzy for Strike’s non-operating former joint venture partner at the West Erregulla project, Warrego Energy, which was ultimately purchased by Hancock Energy.
Strike originally moved to acquire Warrego and held almost 26 per cent of the company’s shares when it was outbid by Gina Rinehart’s company, resulting in a boost to its cash reserves of $136 million.
Kerry Stokes-backed Beach also bid for Warrego, with Chris Ellison-led Mineral Resources building its own stake in the company before accepting Hancock’s offer.
Mr Poynton said the interest in Warrego was an endorsement of the quality of the West Erregulla asset.
“The multiple-bidder interest in Warrego’s non-operated share of West Erregulla underscores the strategic value of our assets in a world of shrinking low-cost energy supplies,” he said.
Strike's management will watch with interest as the Domestic Gas Inquiry delivers its findings, with an interim report to be tabled on December 22 and a full report to be tabled at the end of May next year.