Fortescue Metals Group Ltd has become a member of the DomGas Alliance, joining big gas consumers Alcoa Ltd, Alinta Ltd and Newmont Mining Corporation Ltd in the battle to secure competitively priced long-term gas supplies.
Fortescue Metals Group Ltd has become a member of the DomGas Alliance, joining big gas consumers Alcoa Ltd, Alinta Ltd and Newmont Mining Corporation Ltd in the battle to secure competitively priced long-term gas supplies.
The alliance has claimed for about 12 months that its members have been unable to secure substantial gas supplies.
DomGas says Western Australia is experiencing a crisis in domestic gas supplies, which will have significant implications for the state’s economic development.
FMG executive director Graeme Rowley said the iron ore group had joined the alliance because it had significant domestic gas requirements, which would be further increased if plans to develop its magnetite deposit with China’s largest steel mill, Baosteel Trading Co Ltd, proceeded.
“We have quite significant domestic gas demands for the power requirements just for the port, rail and mine businesses,” Mr Rowley said.
“You can’t run an effective business when you have gas around you but you can’t get at it.”
DomGas chairman Stuart Hohnen said the alliance had received significant interest in its campaign and that it was talking to a number of players about potential membership to the group.
DomGas members pay a monthly levy to fund the costs associated with its lobbying efforts, which has included hiring economic consultants to provide advice.
The alliance has complied a report called ‘WA Gas Supply and Demand: The Need for Policy Intervention’, which will be released next week.
It comes almost a month after the Chamber of Commerce and Industry WA delivered a discussion paper that called for greater state government scrutiny of companies that sat on large, undeveloped gas reserves when they sought to renew their retention leases.
The CCI also wants the government to consider lighter regulation of gas pipelines to increase their capacity and usage as part of a package of reforms it put forward to explore alternatives to the government’s contentious gas reservation policy.
The government’s reservation policy proposes that 15 per cent of all gas deposits should be reserved for the domestic market, subject to the proviso it is commercially viable to supply domestic customers.
Woodside Petroleum Ltd has been opposed to the reservation policy, arguing it could compromise the viability of future gas projects.
CCI noted that Alcoa, Synergy, and Horizon Power had been generally supportive of the government’s policy, but found little support for government intervention from other market participants.
Instead, the CCI believes there is strong support for measures to lift market efficiency, such as seeking information from third parties with a perceived interest in particular leases when companies applied to renew their leases.
CCI noted that Chevron’s 2002 application to renew its lease over the Gorgon gas field was subject to a higher level of scrutiny after construction company Multiplex lodged a competing submission.
