Overview of Western Australia’s Domestic Gas Policy
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 and ongoing economic development 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.
LNG exporters’ domestic gas commitments complement supply from domestic-only projects using the WA gas pipeline network. Gas in the WA pipeline network is not for export.
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.
LNG exporters are required to report on their efforts and are subject to independent review. Their obligations, progress in how they are being met and gas supplied and available for local consumers, will be transparent to the market.
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. Any unsold gas must be reserved and made available in support of new economic and industrial development.
Projects may propose to offset their domestic gas commitments 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.
The Department will communicate any agreed changes to contractual arrangements with LNG exporters to the market as they arise. Clarifications on the application of the policy, including for exporters contemplating using gas from the WA pipeline network, are noted below.
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.
Closer integration between domestic and export gas markets in Western Australia and on the east coast is affecting local gas supply. The Western Australian Government has made a number of clarifications on the application of the policy, noted below, in order to preserve the integrity of the policy and local gas market.
Export via the WA domestic gas pipeline network
The WA gas market relies on LNG exporters’ WA Domestic Gas Policy commitments and gas from domestic only producers. Gas in the WA pipeline network is readily accessible to local consumers and needs to support the state’s economic and industrial development.
The Western Australian Government will not agree to export of gas via the WA pipeline network other than in exceptional circumstances.
Other forms of gas export
Domestic gas is for WA consumers. Supply of gas to markets on the east coast, whether via an LNG import terminal or a pipeline connection to east coast gas markets, is an export for the purposes of the policy.
LNG used in international shipping is also an export. Marine fuel is a substantial market opportunity for the LNG industry and the WA Government is supporting development of ship fueling infrastructure in the Pilbara.