Western Australia report calls for gas sector reforms

A parliamentary committee in Australia's largest LNG exporting state of Western Australia (WA) has recommended reforms to domestic gas policies with a significant supply shortfall forecast by the 2030s. But it said the current rule requiring projects keep 15pc in reserve for domestic use should remain in the interests of regulatory certainty.

Gas-rich WA hosts four LNG export terminals but is confronting a shortage amounting to more than 350 TJ/d (9.3mn m³/d) by 2032, which the Domestic Gas Security in a Changing World report said is likely to continue to increase.

But WA cannot rely on sporadic appeals for more gas when the market appears to be tightly balanced, the delayed report said, recommending the domestic gas policy as a whole is reviewed and updated with a new gas security policy objective to be developed.

"WA does not currently generate enough renewable energy to completely offset fossil fuels, and particularly the retirement of coal-fired generators," committee chair and Labor politician Peter Tinley said on 15 August. "Gas will be required to fulfil demand in the interim and will also be used as a firming solution to maintain electricity when renewable sources aren't available."

The committee found that reform of the WA domestic gas market is needed, with some stakeholders describing the market as unique and not effective because of its illiquid, concentrated and opaque nature with limited numbers of suppliers and consumers and most gas traded through confidential bilateral contracts.

The industry is taking action to meet domestic gas obligations, the report said, in response to interim findings that 8pc of the 15pc requirement had been met since 2006. It cited Australian independent Woodside Energy's commitment to double the domestic gas proportion of LNG exports associated with gas from its 4.9mn t/yr Pluto LNG project processed through the Karratha Gas Plant.

The 15pc domestic reservation requirement for offshore sourced gas processed at LNG terminals should be maintained at the present level unless the obligation holder agrees otherwise, the report said.

No onshore sourced gas should be exported as LNG until the domestic gas market is well supplied, the committee said. It proposed that for new LNG projects or gas fields, the reservation amount be set to offset any expected domestic gas shortfall, based on the Australian Energy Market Regulator's forecasts.

WA's Labor government has three months to respond to the report and has indicated it is considering reforms to boost supplies.

By Tom Major