The intricate nature of WA’s gas market has been highlighted in the Federal Government’s Future Gas Strategy, which said new discoveries, the timing of industrial demand, and the Domestic Gas Policy would all contribute to the demand-supply balance and the potential for shortages beyond 2030.

An analytical report accompanying the strategy – which said gas would be needed through to 2050 and beyond – said pricing in WA could be put under pressure as the market tightened.

“Western Australia relies on a small number of large projects, some of which are in decline,” the report said.

“The demand and supply balance… is tightening due to delays in project development and changing demand patterns.”

Alcoa’s decision to close its Kwinana alumina refinery may delay the expected shortfall in the short-term but it would pick up in 2028 as the Perdaman Karratha Urea Project begins production and grows again as coal-fired power stations are retired.

Uncertainty around the timing of Woodside’s H2Perth hydrogen project, and the timing of increased lithium downstream processing add to the uncertainty in terms of future demand. There are four developments aimed at processing hard rock spodumene into lithium hydroxide.

“The current lithium market is under significant pricing pressure discouraging downstream investment (and even spodumene supply cuts) and technical
difficulties associated with processing lithium hydroxide further adds to uncertainty,” the report said.

Between 2027 and 2029, supply is forecast to grow. The Scarborough, South Erregulla, Lockyer Deep, and Waitsia developments are expected to enter the domestic market.

Progressing the West Erregulla or further expansion of Beharra Springs will also help alleviate shortages. However, by 2030, unless undeveloped resources commence
production, supply will begin to decline due to natural field depletion.

The report suggested changes to the WA Domestic Gas Policy could lead to additional supply.

Releasing the Future Gas Strategy, Resources Minister Madeleine King said it made it clear that gas will remain an important source of energy through to 2050 and beyond.
Its uses would change to cater for improved industrial energy efficiency, to firm renewables, and reduce emissions.  

Analyst Saul Kavonic, writing in The Australian, said the strategy was “an amazing about-face from Labor”.

“After showing nothing but ambivalence through to downright hostility towards gas since coming to power in 2022, Labor has now outlined a clear positive
position on gas,” he said.

“Several market and political drivers have forced Labor to finally recognise the value and long-term role for gas. But actions speak louder than words, and there is
still a long way to go before industry will have confidence to invest again. And green activism risks dragging Labor back towards its unproductive stance towards gas
that has compromised our energy security, jobs, climate goals and economy.”

The strategy identified action to reduce the need for seismic surveying, reduce venting and flaring, and promote carbon capture and storage by releasing acreage
for offshore CCS and establish a new initiative on regional cooperation on transboundary carbon capture and storage which will provide options for energy
security and carbon management solutions for our regional partners.

The strategy is centered on six principles that will underpin Government policy on gas.

• Australia is committed to supporting global emissions reductions to reduce the impacts of climate change and will reach net zero emissions by 2050.
• Gas must remain affordable for Australian users throughout the transition to net zero.
• New sources of gas supply are needed to meet demand during the economy-wide transition.
• Reliable gas supply will gradually and inevitably support a shift towards higher-value and non-substitutable gas uses. Households will continue to have
  a choice over how their energy needs are met.
• Gas and electricity markets must adapt to remain fit for purpose throughout the energy transformation.
• Australia is, and will remain, a reliable trading partner for energy, including LNG and low emission gases.

Australian Energy Producers Chief Executive Samantha McCulloch said the strategy was an opportunity to reset gas policy in Australia.

“(It) needs to be backed by clear, tangible actions that urgently unlock new gas supply to address looming shortfalls and provide an unequivocal signal to the
market that Australia is committed to ensuring sustainable gas supply to the Australian economy and the region,” she said.

Giving a glimpse of the enormity of the challenge to wean Australia and the world off fossil fuels, the analytical report said gas accounts for a quarter of current
global energy consumption.

Roughly 83 per cent of global energy consumption is sourced from fossil fuels, including 25 per cent from natural gas.

Australian domestic use of fossil fuels is higher than global consumption levels: roughly 92 per cent of current Australian energy consumption is derived from fossil fuels.

Gas accounts for just over a quarter (27%) of Australia's energy consumption.

In the near term, the Asian and European regions are expected to lead growth in import capacity installation. China, India, Germany, Cyprus, and Brazil are all in
the process of building terminals, and New Zealand is considering adding capacity.

Return to eNews