Domestic Gas export impact more ripple than wave
The State Government will allow 20 per cent of onshore gas to be exported during a five-year window and tighten “use it or lose it” provisions
under new Domestic Gas Policy regulations.
Changes to the policy announced by Premier Roger Cook followed a Parliamentary inquiry which warned of looming domestic gas shortages
and said the existing policy was not fit for purpose.
The Economics and Industry Standing Committee’s final report recommended that the State Government allow onshore gas projects to export
LNG only if the domestic market is adequately supplied and is expected to be well supplied for a period of time.
Under the updated policy, onshore gas developers will have a five-year export window, to 2030, during which 20 per cent of gas production can
be exported, leaving 80 per cent reserved for domestic gas.
The export window closes in 2031, after which 100 per cent of onshore gas is reserved for domestic use.
The 15 per cent reservation for offshore LNG projects remains unchanged.
The Government also committed to publishing a WA Domestic Gas Statement annually, showing how gas producers are meeting their domestic gas obligations.
Commenting on the policy changes for the Energy Club, Rystad Energy’s Krishan Birda said it brought much-needed clarity and transparency through
the WA Gas Domestic Statement.
“It is a positive outcome achieved through collaboration between industry and the Government,” he said.
“The revamped policy opens the door for 20 per cent of Perth Basin gas production to be exported as LNG until 2030. While this move sounds promising,
most projects are still in the pre-FID stage and won’t be operational until 2027-28, meaning the impact might be more of a ripple than a wave.
“The Perth Basin has emerged as a promising prospect for upstream activity, with recent exploration successes and a healthy pipeline of activity.
“Meanwhile, WA faces significant challenges in meeting long-term gas demand, particularly in the 2030s, when it aims to become a minerals processing
hub to support the energy transition.
“Meeting this additional gas demand will require additional supplies, including through more exploration.”
A spokesperson for Mineral Resources said certainty in the domestic gas policy was welcome.
“MinRes will continue assessing all options to maximise value from our Perth Basin exploration success,” the spokesperson said.
The company has just announced maiden resources for the Lockyer Gas Project and the Erregulla Oil Project.
Mr Cook said allowing new gas projects to export a reasonable proportion of production over the next five years will help to stimulate development while
WA's gas market is balanced, and ensure more gas is brought to market in decades to come.
"Our gas belongs to Western Australians, and I want to make sure we maximise the benefit to our State from our gas resources,” the Premier said.
"As we phase out coal-fired power and transition to a renewable energy future, WA needs a secure supply of gas as firming fuel in our system and to help
us to become a global renewable energy powerhouse.
"WA Labor's Domestic Gas Policy has underpinned WA's economic success over the past decade, and under my Government, the policy will set up our
State for our clean energy future.
"This update provides certainty for gas producers and users, helping to facilitate new onshore gas projects – creating local jobs while ensuring our energy needs are met.”
The revised policy will apply to new onshore gas projects or existing projects seeking to expand production.
The Government said an exemption would remain in place for the 'first-mover' in the Canning Basin, to encourage development in the State's north.
The Waitsia project will retain its domestic gas reservation obligations and export permit, issued under the 2020 COVID-19 exemption, however the State
will consider options to facilitate other gas producers to share their infrastructure – providing faster access to market for new projects.
The Premier said the Department of Energy, Mines, Industry Regulation and Safety will review existing legislation to determine how best to strengthen
the “use it or lose it” provisions.
He said the changes would help to prevent land banking of onshore petroleum tenements and ensure more gas is brought to market over the coming decade.
Energy industry analyst Saul Kavonic told the Australian Financial Review that allowing 20 per cent of onshore gas supplies to be exported would not
make much difference and would not achieve the desired outcomes of encouraging exploration and materially assisting the financing of projects.
Strike Energy Chief Executive Officer Stuart Nicholls told the Energy Club of WA "The policy changes are a vote of support for the investment climate and role of gas in WA. The lifting of the export ban will improve the economics of Perth Basin projects and incentivise further exploration."He further added, "Strike looks forward to being Australia's next and newest LNG producer”.
Read more on the updated policy here.
The State’s response to each of the Parliamentary committee's recommendations is available here.