Woodside, Synergy in gas deal

A short-term domestic gas contract between Woodside Petroleum and electricity generator Synergy is the first such deal since the North West Shelf Venture partners moved towards separate marketing of their production.

The agreement was inked last month, with sales to be made at spot prices.

Woodside holds a 16.7 per cent stake in the venture, and is the operator, with the other five shareholders being Chevron, BHP Billiton, BP, Shell and a joint venture between Mitsubishi and Mistui.

The venture’s Karratha domestic gas plant, co-located with five LNG trains, has capacity of about 500 terajoules per day, while demand is about 1,000TJ/d.

Other major suppliers are Varanus Island (owned by Quadrant Energy), Devil Creek (co-owned by Quadrant and Santos), and Macedon (co-owned by BHP Billiton and Quadrant).

By 2020 there will additionally be about 380TJ/d produced from the domgas facilities at Chevron’s Wheatstone and Gorgon projects, while it is anticipated that Karratha’s supply will wind down.

Venture partners selling their shares of gas onto the market separately will lead to greater competition among suppliers (and better prices for consumers), with the Australian Competition and Consumer Commission previously saying it would not be in the public interest to continue joint marketing after the end of 2015.

It was the first direct agreement for Woodside gas from the venture, State Development Minister Bill Marmion said.

"Since 1984, when domestic gas sales from the NWS started, all gas marketing and sales have been conducted jointly by the owners of the NWS domestic gas facilities," he said.

"This deal marks a new era for domestic gas marketing in WA as Woodside is now marketing its share directly to larger industrial, commercial and mining gas users from the Woodside-operated NWS Project."

Energy Minister Mike Nahan said the flexibility of short-term agreements would be beneficial for Synergy.

"Synergy is able to further strengthen its gas supply position on an as-required basis without having to commit to extensive gas supply agreements," he said.

"It is fitting that Synergy, the North West Shelf project's first domestic gas customer, is now able to be a counterparty in a first of its kind supply agreement directly with Woodside.

"The state government welcomes this increased level of competition, which will benefit gas market consumers because there are new sellers in the market.  

"It will also lead to more efficient markets and the best available contract terms and conditions."

Synergy has gas powered turbines in WA, including in Cockburn, and it also wholesales and retails domestic gas, although it can’t retail to smaller users.

Woodside shares were up 2 per cent to $27.11.