Continued gas development needed to keep WA market well supplied

PERTH (miningweekly.com) – Western Australia’s domestic gas market is expected to be well supplied over the next ten years, if gas reserves continue to be developed.

“Growth in domestic gas demand is forecast to be a marginal 0.1% over the outlook period, as there are only a handful of large gas consumers that are expected to enter the market over this horizon, and we are projecting a lower decrease in gas consumption from both mining and minerals processing since this was last reported in the 2015 Western Australian [Gas Statement of Opportunities (GSOO)],” said Australian Energy Market Operator (AEMO) executive GM for Western Australia Cameron Parrotte.

Under its base scenario, AEMO forecasts current and ‘in development’ gas production facilities will be able to meet demand over the outlook period, and based on current production rates of domestic gas and liquefied natural gas (LNG), proved and probable reserves are expected to last until 2035.

“Assuming the continued development of gas reserves, domestic gas supply in Western Australian could exceed demand by at least 88 TJ a year over the ten-year outlook period.”

However, should there be delays in the commencement of the Wheatstone domestic gas production facility, the domestic market could become tight in 2017 or 2018.

Parrotte said that it was important to highlight that continued expenditure would be required to enable several other domestic production facilities to have sufficient developed reserves to operate beyond 2021.

“Adding to the uncertainty, a large proportion of proved and probable reserves are held by LNG export facilities, which may only make gas available for the domestic market beyond their domestic gas obligation quantities should it be commercially viable.”

The Australian Petroleum Production and Exploration Association (Appea) said the GSOO reinforced the need for policies that encouraged exploration and development of new gas supply.

Appea CEO for the western region Stedman Ellis said policy-makers needed to recognise the risks faced by companies from policy instability and investment uncertainty.

“Western Australia needs to rethink its approach to energy security. The existing reservation policy is clearly not sustainable,” Ellis said.

“A policy that relies only on export projects to supply domestic gas cannot meet the state’s future needs when there are no new export projects on the horizon.

“As the GSOO shows, the best prospects for developing new sources of future domestic gas supply in WA lie in encouraging investment in near-shore and onshore projects that are aimed exclusively at the domestic market.

“The evidence shows, however, that gas reservation discourages this investment.”

With about 92% of Australia's total conventional gas resources located onshore and offshore in Western Australia, it is important to note that a large proportion of these resources have not been explored and discovered. In addition, an estimated 311 428 PJ of unconventional resources may be located in Western Australia.

Based on data for the 2016 year to date, exploration in Western Australia’s gas basins is currently at the lowest levels observed since 1990, predominantly due to recent decreases in the international oil price and increasing costs of drilling exploration wells.