Wednesday, May 18, 2011
Asia Pulse Pte Ltd
Western Australia's domestic gas reservation policy is interventionist and may prevent new entrants to the market, the petroleum sector's peak body says.
Former state premier Alan Carpenter in late 2006 introduced the policy, whereby 15 percent of gas from offshore projects must be set aside for domestic use.
The state's reliance on just a few gas producers was highlighted in 2007, when an explosion at Apache's Varanus Island gas processing facility resulted in domestic supplies being slashed by one third for several months, mainly affecting industrial users.
Almost all of the remainder of the WA's domestic gas supply - about two thirds - comes from the Woodside-operated North West Shelf Venture.
However, Chevron has committed to reserve some gas from its Gorgon project under construction on Barrow Island for local use.
Australian Petroleum Production and Exploration Association chief executive Belinda Robinson said mandated gas reservation wasn't necessary to secure domestic gas supply.
The policy could backfire, concentrating WA's gas market even further by deterring new entrants, which would push up prices, she said.
There was no evidence the nearly five-year old policy had driven existing producers to other jurisdictions, however.
"Policy measures that encourage new entrants, more players, more competition, more transparency, are going to better ensure that competitive prices are delivered," Ms. Robinson told a business forum in Perth on Wednesday.
"It also means by diversifying the supply base, we're better equipped to deal with emergencies should and when they occur."
Ms. Robinson said the policy made no difference to the Varanus crisis occurring.
"That's a different issue - that's an emergency response strategy," she told reporters after the function.
"Clearly, in terms of any government looking at long term supply, you have to take the possibility of potential incidents like that into account and you have to have emergency response measures in place to be able to deal with those."
She said Queensland's government had toyed with the idea of a similar policy, but settled on the establishment of a gas commissioner, who was solely responsible for the smooth operation of the gas market.
There was merit in that move, Ms. Robinson said.
WA's policy was currently about providing assurances to the community and acting as "an insurance policy" against the market's failure to set aside enough domestic gas.
But a more sophisticated strategy was needed, she said.
"Let's have something that clearly analyses the gas market in WA ... identify market failures if they occur in terms of supply and then keep open options for a discussion on when that (policy) might work, instead of jumping to a solution and working backwards."
WA's Department of Mines and Petroleum was being sought for comment.
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