PERTH (miningweekly.com) − The Western Australian Chamber of Minerals and Energy (CME) on Wednesday welcomed the signing of a supply agreement between the owner of the Gorgon liquefied natural gas (LNG) project and energy suppliers Verve Energy and Synergy.
Verve MD Shirley In’t Veld said that the agreement with Gorgon gave the company diversity in its gas sources, and would partially replace the gas supply arrangement with the North West Shelf project, which was forecast to run out in 2015/16.
Verve and Synergy would buy gas from the Chevron-operated Gorgon project through long-term contracts. Both companies entered into contracts for a combined 125 terajoules a day for 20 years term starting in 2015.
Chevron Australia’s MD Roy Krzywosinski said the company was pleased to have finalised two significant long-term domestic gas sales contracts for the Gorgon project.
“Domestic gas is an important energy source for Western Australia and these contracts mean more gas competition for the local market. It demonstrates that the market is working,” he added.
Meanwhile, the CME said that the signing of gas sales agreements would help strengthen Western Australia’s future energy security and highlighted the importance of the LNG industry and its links to domestic customers.
“The Gorgon project, together with Pluto, Wheatstone, Devils Creek, Macedon, Browse, Ichthys and Prelude bring investment and jobs and further positions Western Australia as a global gas producer and LNG player,” said CME CEO Reg Howard-Smith.
Howard-Smith encouraged the state government to seize the opportunity to revisit the structure of the Western Australian energy market, the need for continued reform and support for competition for a system that continues to be dominated by State-owned utilities.
“Despite increases in recent years, electricity tariffs remain below what it costs to generate and deliver after an 18 year price freeze. This imposes a significant hit on the state budget with the subsidies to Synergy and Horizon Power estimated at more than A$1-billion between 2011/12 and 2014/15.
“Fully cost-reflective tariffs would encourage energy efficiency and conservation and free up funds to support more efficiently targeted and less market-distortionary assistance to low income households,” Howard-Smith said.
The Gorgon project is due to deliver domestic gas to the market in 2015.
Chevron was seeking approval from the Australian federal government to increase the scope of its Gorgon project from a three-train to a four-train project, taking production from the initial 15-million tons of LNG a year, to 20-million tons a year.