Gas producers and consumers are furiously lobbying the WA government on whether it should allow onshore gas to be exported to handle a shortage predicted over the next 10 years, but no one is talking about a real risk that the state’s biggest supplier could leave the market a few years later.
Because of a deal struck in 2003, Chevron’s Gorgon gas export project – which now supplies about 25 per cent of WA’s needs – could turn the tap off around 2037.
Chevron’s Gorgon LNG plant ships LNG to Japan and elsewhere in Asia.
That sounds like a long time away, but the risk that affordable gas supply may not be available is a drag on current investment decisions, which take a long-term view. At stake are both new gas-consuming projects and, more critically, life extensions to old plants that employ thousands.
Successive WA governments have boasted to their east-coast counterparts about their wisdom in requiring gas exporters to reserve 15 units of gas for local use for every 100 units exported, but the reality is less effective.
Gorgon went ahead based on the 2003 deal with a then-Labor government that did not impose a 15 per cent domestic gas obligation, but a fixed amount to be reserved for local use: 2000 petajoules.
In the ensuing six years, Chevron discovered more gas and decided to build a bigger processing plant. The result, estimated by the DomGas Alliance of big gas consumers, was that less than 7 per cent of the $80 billion project’s gas is reserved for WA.
The company pie had grown, but WA’s slice had not.
Richard Harris, spokesman for the DomGas Alliance that includes Alcoa, Wesfarmers and Pilbara fertiliser manufacturer Yara, said Chevron deserved credit for delivering the gas required under its agreement but could fulfil its obligation as early as 2037.
“It is up to the government how it addresses the issue, but we have consistently said the agreements should reflect the intent of the policy to deliver 15 per cent of liquefied natural gas exports to the domestic market,” he said.