Business groups have strongly criticised Premier Alan Carpenter’s domestic gas reservation policy, which designates 15 per cent of gas produced by future offshore developments for domestic use in Western Australia.
Business groups have strongly criticised Premier Alan Carpenter’s domestic gas reservation policy, which designates 15 per cent of gas produced by future offshore developments for domestic use in Western Australia.
Launched last week, the policy was developed following a government discussion paper in February, which sought feedback from industry on a domestic gas policy to achieve long-term energy security in WA.
The government estimates that domestic gas reserves in the North West Shelf, secured by an existing state agreement, combined with reservations from the proposed Gorgon gas project and smaller non-export sources, will only be sufficient to meet WA’s gas needs for the next decade.
Current reserves in LNG projects are committed to long-term contracts with overseas buyers, and the government argues that there is no guarantee of sufficient gas to meet the future needs of the state.
Under the new policy, developers of future LNG export projects will be required to provide a domestic gas commitment of up to the equivalent of 15 per cent of gas produced by each project, as a condition of access to land for processing facilities.
The government will negotiate with LNG producers on a case-by-case basis regarding the methods used to fulfil domestic commitments and will aim to maximise flexibility for producers, through options such as supplying from an alternative source.
Among those to criticise the plan were the Australian Petroleum Production and Exploration Association, and the Chamber of Commerce and Industry.
CCI chief executive John Langoulant said the government had acted prematurely and with insufficient information and consideration.
“It is an ad hoc decision with huge implications, taken in the absence of a more widely considered energy policy for WA” he said.
“The government’s concern about the outlook for local gas in 10 or 15 years’ time is understandable, but the development of a properly balanced overall energy policy is the more immediate priority.”
Mr Langoulant said the terms of the policy were vague and failed to address the issue of sovereign risk, claiming the policy may impede development proposals and produce conflict between state and federal governments over taxation and constitutional issues.
ExxonMobil Australia chairman Mark Nolan, who commented on the proposed policy last week before its release, applauded the government for considering the issue of long-term energy supply, but condemned the policy of reservation.
“While we do not support a domestic gas reservation as we think it’s counterproductive in the long term and will not help to promote investments in the long-term large LNG projects, we do appreciate the fact that the premier has been willing to consult extensively with the industry and to seek our views as he frames his government’s approach to the long-term policy planning,” Mr Nolan said.
“In particular, I’d like to acknowledge the premier’s commitment to work with energy companies on a project-by-project basis and to seek flexibility in the application of the public policy.”
