THE head of Western Australia’s largest domestic gas supplier has rejected claims from big consumers that the state is facing a shortage of gas supplies in the wake of rising liquefied natural gas exports.
THE head of Western Australia’s largest domestic gas supplier has rejected claims from big consumers that the state is facing a shortage of gas supplies in the wake of rising liquefied natural gas exports.
North West Shelf Venture chief executive Kevin Gallagher told a state parliamentary inquiry into domestic gas prices that it was wrong to claim rising gas prices in WA proved government intervention was needed to guarantee affordable long-term supplies.
Rising prices had actually resulted in an “unprecedented supply response”, with three major new sources of domestic gas due to come online by 2015 that will boost the state’s supplies by 60 per cent: Apache Energy’s $1 billion Devil Creek project; BHP Billiton’s $1.6 billion Macedon project; and the $43 billion Gorgon LNG project.
The WA Domgas Alliance, which represents major buyers such as Alcoa and Alinta, argues that gas prices in WA have more than trebled since 2005 and are now significantly higher than in eastern Australia.
The alliance blames the rise on producers warehousing gas for future sale into the more lucrative global LNG market.
With WA industry therefore becoming increasingly uncompetitive despite its vast gas reserves, the alliance wants direct government intervention to force producers to deliver more gas available to local users.
The alliance has also pointed to recent Department of Mines and Petroleum forecasts of a widening shortfall in supplies after 2014 as existing supply contracts at the North West Shelf expire and new gas-hungry mining projects are developed.
But North West Shelf Gas general manager Ben Coetzer said the venture continued to actively market supplies to domestic customers and that it already had contracts extending beyond 2020.
Furthermore, the shelf partners expected to maintain domestic production at current levels for at least the next decade.
“None of those (DMP) supply scenarios reflect that activity,” Mr Coetzer said.
Nor did the forecasts reflect that gas would actually compete with electricity in supplying new energy demand, or that not all proposed energy-hungry projects would proceed, he said.
Mr Gallagher said the real issue facing WA was the increasing difficulty of developing its remaining gas reserves, in ever-more-remote locations and deeper water.
Given development costs have roughly doubled in less than a decade, higher prices were critical to making new reserves viable, he said.
And given the small relative size of the WA market, an LNG component was required to achieve the economies of scale needed to justify development.
LNG development was therefore pivotal in delivering new domestic gas supplies, Mr Gallagher said.
