Marketplace surge fuels WA’s domestic furore
HOW can energy- rich Western Australia have a gas crisis? The petroleum industry says that it doesn’t — it has just run head- on into the realities of the marketplace.
The state can meet local and LNG export demand for 100 years, but the imbalance in supply to domestic customers over the past 12- 18 months has caused a furore and seen the industry locked in argument with the Carpenter Government.
The heart of the dispute is a 13 per cent jump in gas demand by West Australians after a decade of 3 per cent average annual increases.
The industry lobby group, the Australian Petroleum Production & Exploration Association, asserts that current gas supply contracts are being met and large customers ‘‘ who are genuine about wanting more gas’’ are ‘‘ quietly engaged’’ in negotiations with suppliers.
‘‘ These customers,’’ adds APPEA, ‘‘ know that gas prices in WA are rising to cover increasing costs. They understand that, with the extraordinary demand arising from the resources boom, it will take time to develop new gasfields. Exploration is under way, supply capacity is being increased and demands for new domestic projects are being fasttracked.’’
APPEA points to the very low prices paid for domestic gas. This turned off the incentive for domestic gas exploration and production, it says, and has led to a lag in development of new fields. A lack of spare capacity on the critical Dampier- to- Bunbury pipeline linking the northern offshore fields to the populated south- west of the state has not helped, either.
The dampening effect of low domestic prices has been exacerbated by the surge in exploration and production costs. Development costs have risen 50 per cent in two years and are still going up.
The good news, adds APPEA, is that, now domestic prices are rising in response to the market signals, ‘‘ companies are looking seriously at plans for existing gasfields that were previously uneconomic’’.
The growth in demand for LNG from overseas is also a positive factor. The association points out that the domestic WA is too small to support the development of large, remote and high- cost offshore fields. ‘‘ But once the infrastructure is in place for LNG production and the price for domestic gas is sufficient to attract investment for local purposes, the supply of more gas for the WA market will follow.’’