Worsley Alumina has locked in gas supply deals with Chevron and Woodside Petroleum today, as Santos chief executive Kevin Gallagher warns of a looming price spike.
Chevron will supply Worsley Alumina, which is 86 per cent controlled by South32, 60 petajoules of domestic gas over the life of the agreement, while Woodside will allocate 40 petajoules.
The Chevron gas will come from across the company’s portfolio, including Wheatstone, Gorgon and North West Shelf Venture facilities.
Woodside’s gas will also come from Wheatstone and the NWSV, with Pluto an additional source.
LNG exporting businesses such as Woodside and Chevron are required to quarantine off about 15 per cent of gas production for the domestic market, and these deals will form part of that obligation.
Chevron managing director Al Williams said natural gas was a cleaner alternative for local customers, which supported jobs and strengthened the economy.
“As a flexible fuel, natural gas can be used to power Australia's most vital industries and manufacture products essential to modern life,” he said.
“We are working to increase the supply of natural gas into Australia and international energy markets to help realise the objective of affordable solutions to delivering additional energy the world needs while reducing emissions globally.”
Woodside executive vice-president marketing trading and shipping, Reinhardt Matisons, said the company and Chevron had recently started domestic gas production at Wheatstone.
Price warning
Speaking at a Petroleum Club industry dinner last night, Santos chief executive Kevin Gallagher said gas prices were less than half of those on the east coast.
“In the short tem that looks set to continue," he said.
“Gas supply in WA will decline through 2021 in line with reserve depletion at existing facilities.
“As early as 2022, potential gas supply from existing and under construction sources is expected to be insufficient to meet even the low case for forecast gas demand.
“This means there is a supply gap … that is expected to be filled by opportunities that are not yet sanctioned to be developed.”
Mr Gallagher said that, only eight years ago, new domestic gas contracts in WA had been double those of the eastern states.
“If you want to predict the future, history is always a good place to start,” he said.
“Can we afford to simply rely on new LNG projects for domestic gas projects here in the west?”
