Domestic Gas Policy has ‘potential to stifle investment’
Changes to the State’s Gas Domestic Policy in 2023, to restrict the export of onshore gas fields connected to the existing pipeline network, risks up-ending WA’s precarious supply and demand balance, according to analysts Rystad Energy
In an article for the 2024 Australian Energy Producers Journal, Rystad said the decision had the potential to stifle investment during a critical decade for the energy transition.
“The WA gas market faces strong prospects for medium-term demand but a decline in demand over the long term,” the article said.
“This complicates the supply outlook in what looks to be an era of capital constraint and will likely lead to prices being higher for longer which, in turn, will reduce the competitiveness of WA’s gas-intensive industries.
“In the absence of further intervention, this will challenge WA’s ambitions to become a minerals processing hub.
“The attempt to ensure supply security could lead to coal generation phase-outs in WA being pushed back, which would jeopardise the State and Australia’s interim emissions reduction targets.”
The article said that apart from the Scarborough project, all of WA’s upcoming domestic gas supplies are expected to originate in the Perth Basin.
“These projects will be crucial for the State’s energy security over the next decade given that supply from currently producing fields is expected to decline
by more than 30% by 2030.
“The (2023 Domestic Gas Policy) change takes away LNG market access from new Perth Basin gas projects, leaving limited commercialisation avenues for
these projects once a demand decline sets in.
“For developers in the basin, the export ban could be perceived as a particularly harsh outcome.”
Australian Energy Producers WA Director Caroline Cherry said: “The State’s gas producers have delivered reliable and affordable energy for decades and are keen
to invest in new supply.
“But the right policy settings are needed to set the investment conditions so WA’s reserves can be developed.
“The State must explore for and develop new gas supplies if it wants to avoid energy market turmoil.
“Streamlining approvals processes is one of the fastest ways to get new gas to market. Lifting the export ban for onshore projects will make more ventures viable and
supply more gas to the domestic market.”
WA Parliament’s Economics and Industry Standing Committee is examining the Domestic Gas Supply Policy.
In an interim report in February, it said the policy “is no longer fit for purpose”.
“Application of the policy in its current form is unlikely to mitigate an imminent and potentially severe gas supply shortfall,” the report said.
“This shortfall is likely to threaten thousands of WA jobs, jeopardise billions of dollars’ worth of economic activity and derail the State’s decarbonisation agenda.
“Although the policy’s principles are intended to protect Western Australians from situations like these, it is clear to the Committee that the policy is not robust enough
to ensure that an adequate supply of gas will be delivered to the domestic market.
“The committee is also aware that there is considerable variation in the amounts of domestic gas delivered by LNG producers relative to their LNG exports.
“The State has relied on LNG producers to do right by Western Australians in adhering to the principles and spirit of the Policy. However, the committee believes there is
now a case for government intervention.”