THE state government will come under fresh pressure from domestic gas users after last week’s landmark agreement between Chevron and Apache Corporation to develop the Julimar and Brunello gas fields.
THE state government will come under fresh pressure from domestic gas users after last week’s landmark agreement between Chevron and Apache Corporation to develop the Julimar and Brunello gas fields.
Under the deal, Apache and Kuwaiti partner Kufpec will supply gas from Julimar and Brunello to Chevron’s proposed $20 billion Wheatstone LNG plant at Onslow.
In return, the two companies will take a combined 25 per cent interest in the Wheatstone project, which is slated to start production in 2016.
The deal has disappointed many big WA gas customers who had been hoping the fields would supply local industry amid fears about the future availability of affordable gas.
The DomGas Alliance, which represents local gas customers, is preparing a submission demanding that the state government takes a tough line on reserving gas from the Julimar and Brunello fields for domestic use.
Under the government’s domestic reservation policy, 15 per cent of gas from WA gas fields must be reserved for the domestic market. But neither Julimar nor Brunello lies in state waters, technically putting them beyond the state government’s reach.
However, the WA government can impose reservation as a condition of granting state development approvals, as it has for Woodside’s Pluto LNG project and Chevron’s Gorgon venture, both of which lie in federal waters.
The Gorgon State Agreement predates the current reservation policy but reserves two trillion cubic feet of gas for the domestic market, sufficient to supply up to 300 terajoules a day to local users. Production must start by the end of 2015, unless Chevron can prove it would be commercially unviable to do so.
However, the alliance is highly critical of Gorgon’s reservation obligations, which represent less than 5 per cent of project output and indications that domestic gas output will not reach the full 300tj/day rate before 2021.
The alliance is also critical of the Pluto agreement, which reserves 15 per cent for domestic use but allows a five-year delay between first LNG exports and domestic supply.
A spokesman for Premier Colin Barnett confirmed reservation would apply to Julimar, Brunello and Wheatstone, but said the government was “prepared to introduce some flexibility on a case-by-case basis”.
That is unlikely to placate the alliance, which maintains reservation must also apply to output and that domestic supply should start in tandem with LNG exports. It also argues reserved volumes should rise with any lift in project reserves.
Nor is it likely to satisfy the oil and gas lobby.
“Reservation policy ... dampens incentive for exploration and the development of smaller gas fields more suitable for domestic supply,” said Tom Baddeley, WA director of the Australian Petroleum Production and Exploration Association.
