Winners and losers unveiled in Western Australia’s gas crackdown
While the big end in town is up in arms, some of its junior oil and gas industry compatriots have welcomed news of the Western Australian government’s decision to update its WA Domestic Gas Policy.
The change to the gas policy covering the onshore Perth and Canning basins has received mixed reactions from the industry, with a number of winners and losers unveiled.
Leading Australian oil and gas industry lobby body, APPEA, described the government’s decision as “extremely disappointing” stating it would curb investment in new onshore gas supply.
However, at the other end of the scale, Canning Basin explorer and developer Buru Energy (ASX: BRU) welcomed the news, saying it is now free to export gas from the far north of WA.
APPEA appalled
APPEA said the government’s decision to not consider any exemptions from the WA Domestic Gas Policy would discourage investment at a time when the State needs more gas supply to meet growing demand as coal shuts down and new mineral processing industries emerge.
APPEA WA director Caroline Cherry said the changes would make it harder for onshore developers to access investment for projects and disincentivise producers from bringing new supply into the market.
“This is a disappointing outcome particularly given there is a Parliamentary Inquiry currently taking place into the effectiveness of the Dom Gas Policy and Government has pre-empted any recommendations out of the Inquiry process,” she said.
“Part of the ongoing inquiry was looking at the Government’s role itself in ensuring adequate supply into the future and yet these pre-emptive policy changes without consultation will undermine investor confidence.”
In December, the Australian Energy Market Operator (AEMO) WA Gas Statement of Opportunities (GSOO) found overall WA domestic gas demand was forecast to increase from 1,099 TJ/day in 2023 to 1,278 TJ/day in 2032, at an average annual rate of 1.7%.
“WA needs to bring more gas supply to the market to power WA’s growing resources sector and support the South West electricity system as coal-fired power is phased out,” Cherry said.
“But today’s changes, and the way they have been announced, are the opposite of what is needed and will only diminish new gas supply investment and the state’s path to net zero.”
Buru celebrates
Meanwhile, Buru Energy has welcomed findings that the update will not significantly impact development of its Rafael conventional gas and condensate discovery.
The company’s chief executive officer, Thomas Nador, said Buru’s phased development strategy for commercialising its Rafael discovery works in harmony with the policy which requires Canning Basin gas project developers to make available 15% of export volumes for the domestic market.
“Buru welcomes the added certainty the updated Domestic Gas Policy brings to its Rafael gas and condensate development.”
“The Canning Basin is not connected to an existing pipeline network. By confirming the project is able to export gas in the future provides Buru with strategic optionality to develop Rafael, and significantly enhances the attractiveness of the project to potential development partners.”
“This is positive for the development of Rafael and the Canning Basin, positive for the region and positive for our shareholders.”
Government trumpets supply certainty and new jobs
The WA Government says the updated WA Domestic Gas Policy will secure domestic gas supply and create new jobs.
To ensure domestic energy security, the WA Government says it will not consider exemptions from the WA Domestic Gas Policy for onshore gas developments on the existing pipeline network to export LNG, including those in the Perth Basin. Gas from the existing pipeline is for Western Australian industry and consumers only.
For the Canning Basin, these gas resources are not connected to the existing pipeline network and as such a normal application of the WA Domestic Gas Policy applies, which requires gas project developers to make available 15 per cent of exports for the domestic market.
Long-term energy needs secured
The WA Government declared the Domestic Gas Policy will secure WA’s long-term energy needs and ongoing economic development by ensuring that LNG exports also make gas available to the domestic market.
While the government claims it is applying the policy in a flexible manner, it said LNG projects must comply and actively demonstrate their ability to meet the policy conditions to attain project approval.
The policy stipulates that LNG projects must commit to making domestic gas available, including reserving domestic gas equivalent to 15% of production form each LNG export project.
According to the government, prices and contracts for domestic gas projects will be determined by the market, and any unsold gas must be reserved and made available in support of the state.