Overview of Western Australia’s Domestic Gas Policy
Western Australia is a large producer of gas. Around 90 per cent of Australia’s estimated recoverable conventional gas reserves are located in the Carnarvon and Browse basins in the State’s north west. These gas fields support WA’s liquefied natural gas (LNG) export industry, as well as the State’s domestic gas market.
The WA Government’s domestic gas policy aims to secure the State’s long-term energy needs by ensuring that LNG export project developers also make gas available to the domestic market. The policy seeks to make gas equivalent to 15 per cent of exports available for WA consumers. Supply under the policy complements supply from domestic-only projects.
The WA Domestic Gas Policy
The WA Government applies the policy, outlined below, in a flexible manner. LNG projects must demonstrate their ability to meet the policy as a condition of project approval.
LNG projects will commit to make domestic gas available by:
• reserving domestic gas equivalent to 15 per cent of LNG production from each LNG export project
• developing and obtaining access to the necessary infrastructure (including a domestic gas plant, associated facilities and offshore pipelines) to meet their domestic gas commitments as part of the approvals process
• showing diligence and good faith in marketing gas to the domestic market.
These efforts may be subject to independent review. Projects are required to undertake these actions such that domestic gas is available to coincide with the start of LNG production. The timing may vary depending on project circumstances. Prices and contracts for domestic gas will be determined by the market.
Projects may propose to offset their domestic gas commitment by supplying gas or other energy from alternative sources, rather than supplying gas from their LNG projects. Offsets must provide a net addition to the state’s domestic energy supply.
The policy is given effect through long-term contractual arrangements between developers of LNG export projects and the WA Government. These agreements are struck at project inception in order to provide certainty for LNG project developers and allow for a sustained supply of gas into the local market.
If the domestic market is well supplied, the policy does not force producers to sell gas. Any unsold gas must be reserved for when market conditions change.
The Department will communicate changes to policy settings or contractual arrangements with LNG exporters to the market.
Development of the Policy
Successive WA governments have maintained a domestic gas policy since helping underwrite the North West Shelf LNG project in 1979. The policy was formalised in 2006 and clarified in 2012.
The policy has been given effect through domestic gas agreements struck with LNG project developers. The nature, specifics and confidentiality of the agreements has varied over time.
Domestic gas supply commitments with the Gorgon (2003) and Wheatstone (2011) LNG projects are now replacing longstanding historical supply from the North West Shelf. Further supply from the North West Shelf has also been secured through a 2015 agreement.
Information on domestic gas agreements struck with the State, progress on the implementation of the agreements and recent developments relating to the policy is here.