Western Australian natural gas

Energy Policy 1994 22 (4) 309-316

Western Australian natural gas Frank Harman

Western A ustrafia has 80% of A ustralia's natural gas resources. These resources are currently exploited to supply the Western Australian market and L N G to Japan. Growth in the market in Western Australia is dependent on limited prospects for power generation and mineral resource processing. Future exploitation of gas resources will require new export L N G markets and~or the installation of a transcontinental pipeline to eastern Australia. The transcontinental option should only be considered after other options for energy supply in eastern Australia are eliminated. Competition to meet market growth in North-east Asia will be considerable and Australia lacks the policies to underpin future L N G capacity. Keywords: Gas resources; LNG; Transcontinental pipeline Since the discovery of natural gas off the Western Australian coastline in 1971, there has been a sustained political and economic debate over the use of that gas. 1 Further discoveries in the Carnarvon basin and other Western Australian off-shore sedimentary basins now mean that Western Australia possesses 80% of Australia's known natural gas resources. Currently, the state government of Western Australia is considering the options for the use of the gas. Following the recommendations of the Industry Commission2 the Australian federal government in Canberra is also considering options in the light of its policy to push for greater efficiency in the electricity and gas supply industries. The federal government has embarked on a process of reducing state government powers over electricity and gas policy in the belief that a national policy framework is required for greater efficiency. Furthermore, the federal government believes that the state governments have shown themselves to be too parochial and inefficient in their policies towards the use of natural gas and the generation of electricity. Frank Harman with the Economics Department at Murdoch University, Murdoch, Western Australia 6150, Australia.

0301-4215/94/04 0309-08 © 1994 E}utterworth-Heinemann Ltd

From 1984 the populated south-west of Western Australia has been receiving gas from the North West Shelf project. This project is the first to exploit the gas resources of the Carnarvon basin, and it has been undertaken by six joint venture participants: Woodside Petroleum, Shell, BP, BHP, Chevron and Japan Australia LNG. Woodside Petroleum and BHP are Australian public companies and Woodside is the operating company for the North West Shelf Joint Venture Participants (NWSJVP). Japan Australia LNG was created through an association of the Japanese companies Mitsui and Mitsubishi. The domestic phase of the project began in 1980 with the signing of a contract for the supply of gas to the State Energy Commission of Western Australia (SECWA) with deliveries to start in 1984. The bulk of the gas is carried to the south-west of the state through a pipeline owned by SECWA. Gas for the domestic phase comes from the North Rankin field by way of a single production platform. Export contracts for a 20 year supply of LNG were signed in 1985 with eight Japanese electricity and gas utilities, and deliveries began in 1989. Production of LNG has increased in each year since 1989 and is expected to plateau in 1995, with the completion of the third train and debottlenecking, at 7 million tonnes pa. To meet the additional gas demands a second field, Goodwyn, will be in production in 1994 following the installation of a production platform over the field. Both the North Rankin and Goodwyn fields are rich in condensate, providing scope for a dual income stream. The original domestic supply contract between SECWA and the NWSJVP was, with the benefit of hindsight, badly constructed. In 1979 the state government believed that price was of lesser importance than security of supply as a criterion determining future gas consumption. The contract signed in 1980 resulted in SECWA agreeing to take too much gas at too high a price on a 95% take or pay basis. The consequence is that, a decade after deliveries started, SECWA has accumulated a prepaid inventory of gas valued at some A$300 million, the equivalent of six months of contract deliveries. The state Australian Labor Party (ALP) govern309

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