A parliamentary committee has recommended WA establish a gas market monitor to improve the operation of the market, after finding wholesale gas prices in WA are now at levels double that of the eastern states.
A parliamentary committee has recommended WA establish a gas market monitor to improve the operation of the market, after finding wholesale gas prices in WA are now at levels double that of the eastern states.
The committee also supported the maintenance of the state's Reservation Policy, which requires up to 15 per cent of gas deposits being reserved for the domestic market.
The Economics & Industry Standing Committee, chaired by Liberal Mike Nahan, concluded that the state's experience since 2007 was "inconsistent with a well functioning market".
Its report found the sharp rise in domestic gas prices in recent years can be attributed to insufficient domestic gas processing capacity to meet a spike in demand from the resource sector as well as rising production costs.
"The insufficient capacity has largely resulted from an inefficient market lacking in competition, transparency and liquidity," it found.
"The committee's strong view is that the government should look at implementing policies that de-link the domestic gas market from the international LNG market."
The proposed gas market monitor is based on the concept of the recently appointed gas market commissioner in Queensland.
It would continually monitor the supply-demand balance in the WA market, identify deficiencies or failings across the gas supply chain and facilitate discussions on corrective measures, and provide advice to the minster on appropriate volumes and processing capacity requirements.
The peak body representing Australia's oil and gas industry said the WA government may struggle to reconcile a number of the recommendations with its goal of encouraging a more efficient, transparent and competitive domestic gas market.
The Australian Petroleum Production & Exploration Association (APPEA) Director Western Australia, Stedman Ellis said: "The Committee's report advocates, particularly in the case of gas reservation policy, more Government intervention in the market rather than less and this will have the perverse effect of actually discouraging new investment and new gas supply.
"APPEA disagrees with the Committee about the merits of the gas reservation policy and recommendations to make it more interventionist and prescriptive.
"Restrictions on how gas is sold and where actually make it harder to justify the commitment of billions of dollars to the development of high cost offshore gas fields that can supply gas to WA but also need access to overseas markets in order achieve the required economies of scale."
APPEA noted the Committee's more positive recommendations to continue work on the development of a Gas Market Bulletin Board and a Gas Statement of Opportunities and to investigate the development of a secondary market in WA.
Shadow Energy Minister Kate Doust said the Barnett Government should be condemned for sitting on its hands while gas prices in Western Australia increased to such an extent.
She said the retention of a domestic gas reservation policy was essential.
"This policy should be flexible enough to allow a suitable amount of gas to be transferred to domestic processing facilities for supply, while not threatening large resources projects," Ms Doust said.
"Labor has constantly called for a Gas Bulletin Board and a Statement of Opportunities to enable transparency over the supply of gas to domestic markets."
Ms Doust said a 40 per cent increase in the total number of residential customers on an instalment payment plan showed the true cost of the Barnett Government's inaction over gas prices.