A parliamentary inquiry in Western Australia’s gas reservation policy has concluded that the policy is “no longer fit for purpose”.
The policy mandates that 15% of gas produced must be allocated for local use. However, the Economics and Industry Standing Committee found that only about 8% of gas reserves are being directed to the domestic market.
While in the past this policy was praised for shielding WA from the supply and price issues faced by eastern states, government intervention may now be necessary to ensure compliance by gas producers.
The committee warned of credible threats of gas shortages in WA, which could lead to increased energy costs, industry and job losses, and impact the state's decarbonisation efforts.
It highlighted a significant variation among producers regarding the volume of gas supplied to domestic markets, suggesting that some are not adhering to the policy's intent.
While the report refrained from naming specific companies, it hinted at the possibility of doing so in its final report due in May.
The report stated: “It does appear that some producers are not operating within the spirit of the polic. Given that the policy is unlikely to satisfy the state’s future domestic gas requirements in its current form, the committee believes there is a case for government intervention.”
A clear strategy needed
Opposition energy spokesman Steve Thomas responded to the findings, suggesting that the State Government has been overly reliant on this policy without properly assessing and managing its effectiveness.
He emphasised the need for a clear strategy to rectify the identified issues, which he says the current government has failed to pinpoint.
“It appears that after years of Mark McGowan lauding the WA domestic gas policy as the perfect solution to our domestic energy issues, the State Government has outsourced its assessment and management of domestic gas policy to a parliamentary committee,” Dr Thomas said.
“The committee seems unsure whether government, industry, or a combination of the two should be fixing the problem,” he said.
“But that is at least one step ahead of the government, who haven’t been able to identify any of these issues.”
The Chamber of Minerals and Energy of WA (CMEWA), representing major LNG producers and gas consumers including Woodside Energy, Santos, Chevron (NYSE:CVX), Shell (LON:RDSa), Inpex, Perdaman and Yara Pilbara Fertilisers, acknowledged the potential substantial gas shortfall in the coming decade.
CEO Rebecca Tomkinson stressed the importance of securing gas supplies for the economy and the state's decarbonisation goals, calling for a balanced revision of the gas policy to prevent adverse outcomes.
“The report is clear that any scenario that jeopardises our gas supply security is likely to result in higher gas and electricity prices and is a risk to jobs and the state’s decarbonisation agenda,” Tomkinson said.
“A low-carbon economy is not possible without first securing the natural gas, critical minerals and other resources needed now for a net zero future.”
The CMEWA stated that changes to domestic gas policy settings must balance the needs of both gas consumers and producers. It said further consultation was required.