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WA gas market to remain tight in short term - report

Image shows an LNG plant

Photo by Bloomberg

11th September 2023

By: Esmarie Iannucci

Creamer Media Senior Deputy Editor: Australasia

     

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PERTH (miningweekly.com) – An independent report into Western Australia’s gas market has found that domestic supply would remain tight until 2027, until new supply led by Perth basin and Scarborough volumes came online.

Independent researcher Rystad Energy found policy and regulatory stability remained vital for the gas industry to invest A$11-billion in new supply needed to meet demand in Western Australia over the next decade.

In its Western Australia domestic Gas Policy study, which was commissioned by the Australian Petroleum Production & Exploration Association (Appea), the researcher found that new gas supply from the Perth basin and Scarborough would be key to addressing near-term market tightness but significant new supply would be needed to meet growing demand after 2030.

“New gas supply is needed to offset declining production from legacy fields and meet growing demand,” Rystad Energy said.

“Gas demand will remain robust through to 2033, with new gas plants needed to support planned coal retirements and the expansion of renewables in the power sector alongside an almost doubling of industrial demand for gas.”

The Rystad Energy report also found that the liquefied natural gas (LNG) Domestic Market Obligation had supported gas supply and price stability in Western Australia, delivering a gas price benefit to domestic customers of around A$1.2-billion each year.

Allowing onshore gas projects to access export markets would expand the number of commercially viable projects, unlocking new supply and delivering benefits to the Western Australian market.

According to Rystad Energy, “access to larger export markets reduces the domestic price required for fields to become commercial while improving access to capital and financing”.

Appea in August made a submission to the Inquiry into the Western Australian Domestic Gas Policy, recommending review should focus on promoting new gas supply, arguing timely and affordable delivery of gas to the domestic market could be helped by removing the export prohibition for onshore gas projects, avoiding changes to the current offshore domestic market obligations (DMO), and establishing a regulatory framework for unconventional gas reserve development.

Appea has also called for faster approvals to unlock new gas supply and the development of a framework for price transparency developed in collaboration with industry.

“The industry is committed to providing a secure, reliable and affordable supply of natural gas to Western Australia’s households and businesses,” Appea WA director Caroline Cherry said.

“Gas is critical to Western Australia’s cleaner energy future and net zero targets, powering WA’s growing resources sector and supporting the South West electricity system as coal-fired power exits.

“The development of Western Australia’s world-leading LNG export industry has been a critical driver of the State’s energy security and underpins supply and lower prices while delivering substantial economic benefits to Western Australia.

“Securing these benefits for Western Australia in future years requires a stable policy and regulatory environment that provides certainty to natural gas sector participants and investors.”

Cherry said recent changes to the Domestic Gas Policy in Western Australia before the conclusion of the Inquiry were contrary to policy and regulatory stability and put at risk adequacy of future domestic gas supply in the state.

“Critical investment has been put at risk at a time when the state needs more gas supply to meet growing demand,” she said.

The state government at the end of August updated its Domestic Gas Policy for the Perth and Canning basins, preventing the export of onshore gas through the existing pipeline network.

The Department of Jobs, Tourism, Science and Innovation announced that in order to ensure domestic energy security, the Western Australian government would not consider any exemptions from the Domestic Gas Policy for onshore gas developments on the existing pipeline network to LNG, including those in the Perth basin.

Gas from the existing pipeline would be reserved 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 Western Australian Domestic Gas Policy applies, which requires gas project developers to make available 15% of exports for the domestic market.

Edited by Creamer Media Reporter

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