Western Australia Lifts Gas Export Exemption for Onshore Producers

tendata blogTrade Trends News

ten data blog17-08-2023

Key point:

- WA onshore gas producers will not be allowed to export fuel

- A project backed by Kerry Stokes had previously been exempted

- Industry sources say government restrictions will discourage investment

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The WA government has quietly announced that no onshore gas field will have the same economic advantage of access to international markets that the Waitsia gas field, owned by Japan's Mitsui and Kerry Stokes-backed Beach Energy, will have in 2020.

The policy change was not announced in the government media, except for a low-key "bulletin" issued Tuesday by the Department of Jobs, Tourism, Science and Innovation, led by state Development Minister Roger Cook.

Any onshore gas projects will be banned from shipping their product outside WA unless there are exceptional circumstances, a move that then Premier Mark McGowan said was necessary to ensure the state had enough gas to meet its own needs.

The decision was criticized by many, including former Premier Colin Barnett, who called it "appalling" and "discriminatory", while Mr McGowan argued it was justified because it would create jobs amidst pandemic uncertainty. Mr. McGowan argued that the decision was justified because it would create jobs in the midst of a pandemic of uncertainty.

But a brief statement released on Monday indicated that the government would no longer consider exemptions for future projects, removing what some companies said was an important way to reduce local gas costs.

Strike Energy chief executive Stuart Nicholls said, "We believe that by partially stockpiling contracts with access to these export markets and higher prices, we will be able to deliver more gas to Western Australian consumers faster and cheaper."

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Restrictions "discourage investment"

Strike Energy, an emerging gas producer, wants to compete with the likes of Ms. Reinhardt's Hancock Energy and Mr. Ellison's Mineral Resources to develop the Perth Basin.

"Ongoing restrictions by the WA government will discourage investment in developing the Perth Basin for gas faster and on a larger scale, reducing the supply of gas to the domestic market," Ellison said in a statement.

"We want to help ensure there is adequate domestic supply, but the case for developing more new gas quickly and putting more gas into the domestic market is strengthened if projects can rely on some LNG sales."

The supply issue is one on which both the government and industry agree, especially as WA is racing to end its reliance on state-owned coal-fired power stations by 2029, which is expected to increase gas demand.

Analysis released late last year predicted WA would go from having plenty of gas to struggling to meet demand from the start of the next decade.

A spokeswoman for the Premier said the government needed to isolate as much gas as possible for local use because of the projected shortages.

"The state government's top priority is to ensure domestic energy security," the spokesman said.

"The gas crisis on the East Coast triggered market intervention by the Commonwealth, highlighting the importance of securing our energy supply."

  >>>Click to Check More Import And Export Information from Tendata<<<

Supply management is key

Energy market analyst Mark Hanna said managing supply over the next few years would be a key issue for the government, but disagreed with the industry's assessment of how policy changes would play out.

"Gas prices in WA are high, arguably as high as on the east coast at the moment, so for suppliers in the Perth Basin current gas prices remain attractive," he said.

Domestic prices have roughly tripled in the past two years, meaning the gap between the lucrative export market and local sales has narrowed.

Opposition energy spokesman Steve Thomas agreed the potential impact of the policy shift was likely to be small.

"The onshore gas industry has been putting their product on the domestic market for a very long time," he said.

"I don't think just strengthening what's there will change the market or threaten the industry as a whole."

But Dr. Thomas said the government's decision to block any future exemptions raised questions about why the Waitsia project was granted an exemption in the first place.

He says: "The exemption granted by Mark McGowan came at the time of the biggest mining boom the state has ever seen, and the biggest boom of any state, so it doesn't make sense to suddenly need it to stimulate the economy."

Market Analysis - A Must for Gas Importers

When you are in the business of importing natural gas into Australia and encounter a policy change, you need to re-analyze the market and locate new import destinations and acquire new customers.

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