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      Gas, Generation & Storage, Policy & Regulation — 9 mins read

      Is Western Australia facing an imminent gas crisis?

      While Australia’s east coast has been in the grip of gas supply and pricing issues, Western Australia has largely remained immune to these afflictions.

      Not anymore though – or so it would appear.

      A series of factors (including alarming increases in spot prices, alleged poor planning and ageing coal-fired power stations) has led to unprecedented gas price rises, and concerns that the state may be facing a far-reaching supply shortfall.

      In response, the WA government is conducting an inquiry into the market and offering electricity credits to households to ease cost-of-living pressures.

      The causes of a volatile market

      Although traditionally stable, the WA gas market is currently tighter and more volatile than before. One of the key drivers behind this is the decline in reliability of ageing coal-fired power stations, which are due for closure by 2029.

      DomGas Alliance Chairman Richard Harris says other factors in the tightening conditions include a growing depletion in older supply fields, recent technical disruptions in production and delays in building new domestic-focused projects due to lengthy approval processes.

      “As well, a few of the LNG producers which have domestic gas obligations under the gas reservation policy have not been meeting their 15% target, instead focusing on LNG sales to take advantage of high global prices,” he says.

      Are there potential shortfalls in supply?

      According to the AEMO, there will be a small deficit from 2023 to 2026. This will increase in the years 2027 to 2029, and then again beyond 2030 due to retirement of coal generation and a decline in production from existing gas fields.

      Harris is of a similar view, stating that the current shortfall, although small, is causing the spot price to rise, and that this situation could slightly worsen in 2024.

      “We should be back in rough balance by the end of the decade, as new projects come on – like Scarborough, and some of the Perth Basin projects,” he says.

      But Harris thinks that the situation will be much worse in the following decade, with larger shortfalls potentially up to 200TJ/d as production declines and demand increases – particularly with the retirement of the coal-fired plant in Collie.

      “Gas demand is growing in WA as new gas-using projects are being developed, especially for processing minerals such as lithium and rare earths, which need the gas for heat not just power,” he says.

      How does the WA Domestic Gas Policy help?

      This policy goes back to 2006, and aims to ensure 15% of WA gas is retained for use in the state, with the rest being exported as LNG.

      Harris refers to the policy as a “far sighted initiative” that has enabled the state to take advantage of its raw materials, and add value through plentiful, relatively cheap, clean energy.

      However, the application of the policy has been somewhat flexible. Some industry commentators think it should be more strictly enforced to help ensure domestic supply.

      The WA Government announced an inquiry in June 2023 to re-examine the effectiveness of the scheme.

      The DomGas Alliance has made submissions to the inquiry, stating that it strongly supports the policy, but considers better compliance mechanisms are needed. Harris is expecting that the government will take up some of the recommendations in the next year.

      Could the 15% reservation target be increased?

      There is speculation that the target could be increased to encourage more projects and in turn improve gas supply.

      Harris does not think the government will increase the target. But he does believe it is likely to start enforcing the existing target more rigorously than before.

      He also points out that the government has announced a prohibition on exports of all onshore gas that is in close proximity to existing pipeline infrastructure.

      “This mainly applies to gas in the Perth Basin which has historically supplied the domestic market,” he says.

      “This decision was made in order to clarify that those onshore projects are reserved for domestic use only.”

      Harris adds that the WA Government has learned from the mistakes made by east coast governments in allowing onshore gas to be exported without any limitation or commitment to supply its domestic customers.

      What role could renewable energy play in all this?

      Harris says that in the short to medium term, more gas will be needed to replace coal in the energy mix.

      “This is still a win for the environment, as it generates only 50% of emissions from coal. So, there will be an increase in gas used for power generation from now until mid-2030s.”

      Gas powered generation will be needed to back up renewable energy in the grid, he adds.

      “In time, renewables, plus battery storage, will slowly begin displacing gas, but not until well into the next decade.”

      Another point Harris makes is that in WA, approximately 60% of all gas consumption is for industrial use, such as feedstock for chemical production, fertilisers, explosives, and as heat for mineral processing. Renewable energy cannot provide a substitute for these processes, he says.

      “In time, hydrogen can possibly to substituted, but it is not commercially viable yet, and won’t be for close to 10 years.”

      What is the ongoing role for gas in WA?

      According to Harris, WA’s abundant gas reserves, both onshore and offshore, have provided big opportunities for the state’s economic development – especially given that gas has been used to power the mining industry and minerals processing. This abundance has also enabled WA to become a world player in fertiliser production and LNG exporting.

      “Unlike the east coast, which has used coal as its major energy source for economic development, WA has used gas. Gas underpins WA’s economy and has also provided a huge boost to the Australian economy and our wealth,” says Harris.

      “Decision makers nationally need to understand how important it is for the nation that the gas continues to deliver energy for our industry for some time to come.”


      Tess Oliver, Article Writers Australia

      Energy Monthly

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      June 11, 2024 | Melbourne Convention and Exhibition Centre

      Australian Energy Week 2024

      June 12, 2024 | Melbourne Convention and Exhibition Centre


      September 3, 2024 | Aerial UTS Function Centre | Sydney

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