WA Energy Minister sees opportunities in the pipeline

Western Australia currently has more than $100 billion worth of resources projects either underway or committed to and produces 69 per cent of Australia’s natural gas.

The state consumes a large amount of energy as a result of growth in mineral processing and extraction, its general economic expansion, as well as becoming a substantial energy exporter. This means that in the longer term, Western Australia must find a balance between ensuring the security of energy supply to meet the ongoing needs of its expanding domestic economy, while also facilitating growth in energy exports.

Mr Collier says that developing gas infrastructure is a natural adjunct to this, such as the government’s proposed development of a natural gas pipeline extending from Bunbury to Albany.

Gas developments in the pipeline

The South West Pipeline has been labelled a government priority and will be expected to carry around 50-100 terajoules per day of gas.

Mr Collier says that the pipeline has been a long term commitment for the Western Australian Liberal Party, who campaigned for the pipeline’s development in its 2005 election campaign.

He says that the pipeline will provide “enormous opportunities” for those in the southwest of the state, including a lower cost alternative to bottled liquefied petroleum gas for many customers and opportunities for industry throughout the southwest, by encouraging value-adding and export through access to internationally competitive gas prices.

Construction of the $225 million pipeline has been flagged to begin in the newly elected government’s first term and is currently in the preliminary stages of development. “The promise was to start this in the first 100 days of a Liberal Government and this has happened,” says Mr Collier.

Mr Collier says that the Government wants to expand as much gas infrastructure as possible to ensure the state’s domestic gas supply.

“The South West Pipeline is only part of the deal. There are no sacred cows in regards to extending gas pipelines,” he says.

“The Liberal Government is committed to returning the quality of Western Australia’s energy supply network to world-class standards.”

Mr Collier explains that the current economic climate will not hamper the development needed to sure up the state’s gas supply.

He says that bigger infrastructure projects such as mining will feel the impact of a global economic crisis to a greater extent than smaller projects. He believes that Australia, will not affected as much as other countries and that the State Government has not thought about providing grants or taking measures to ensure certain projects go ahead as yet.

Options for domestic gas supply

Mr Collier says that the Western Australian Government has to play an important part in facilitating the growth of the gas industry. “We’ve got to!” he says. “We’ve got the Emissions Trading Scheme breathing down our necks and clean gas is an alternative to the higher-emissions sources of energy.”

The state’s current domestic gas policy stipulates that 15 per cent of gas reserves are to be used for domestic use. When asked if the amount of gas set aside would be changed in the future, Mr Collier says that while there are no plans to alter the policy at the moment, “all options are open on all issues.”

He does, however, note that the Western Australian Government, through the Department of Industry and Resources, is looking to address the state’s long term energy needs through a range of initiatives such as further utilising under-explored areas and existing developments, as well as developing the state’s tight gas potential.

“Exploration and development of onshore gas fields in under-explored areas that are close to existing infrastructure is being encouraged and, in co-operation with the Commonwealth, the state is similarly encouraging the development of offshore petroleum fields located in Retention Leases that are also close to current infrastructure,” says Mr Collier.

In regard to tight gas, Mr Collier says that while commercialising tight gas has previously been difficult and expensive due to the specialised drilling techniques required to extract the gas from low permeability reservoirs, “high gas prices and increased domestic demand has now made these fields viable for explorers.”

Meanwhile, a number of LNG developments continue to progress within the State, with Woodside’s $12 billion Pluto Gas Project, the largest of all major and advanced energy projects in Australia. In addition, a number of very large LNG projects including the Browse, Gorgon, Ichthys and Sunrise developments are continuing to progress. These projects are set to provide gas for export and some domestic supply.

The implementation of a Carbon Pollution Reduction Scheme (CPRS), under which LNG projects are not named a trade-exposed industry, has the potential to reduce the profitability of the industry.

Mr Collier says, “The LNG industry will experience an increase in its operating expenses. We cannot say how much at this stage, as the impact of the carbon price will vary from project to project.”

The LNG industry has indicated that a typical project of 10 million tonnes per annum, which would incur a carbon price of $20 per tonne under the CPRS, would equate to operating expenditure increasing by 70 per cent.

“Shelving any LNG projects would be detrimental not only to Western Australia but the whole of Australia. It is important that the Federal Government gives consideration to the impact of the CPRS on the LNG industry.”

Connecting with the east?

Western Australia is not currently participating in the national gas market bulletin board, which was established on 1 July 2008. The board aims to facilitate trade in gas and capacity over relevant pipeline systems through the provision of system and market information.

The bulletin board covers all major gas production fields, major demand centres and natural gas transmission pipeline systems, including the interconnected systems of South Australia, Victoria, Tasmania, NSW, the ACT and Queensland. Provision has been made for Western Australia and the Northern Territory to partake in the bulletin board in the future.

Mr Collier remains uncertain as to whether Western Australia will participate in the bulletin board. He says that he has been in extensive briefings regarding the subject and a decision will be made in the future.

In October 2008, Premier Colin Barnett put his support behind the development of a trans-continental pipeline to run from the northwest cape of the state to the eastern coast of Australia.

Mr Collier declined to comment on whether such a pipeline would go ahead. The proposal for a pipeline that will stretch across Australia, linking the nation’s gas infrastructure by connecting the North West Shelf gas hub to the Moomba gas hub, has been explored at various times without successful development.

Relishing the industry

Mr Collier says that he is finding his position of Minister for Energy “extremely exciting”.

Previously, Mr Collier was the Shadow Minister for Education and he says that he has a lot to learn about Western Australia’s massive gas industry. However, he is up to the challenge. “I’m really looking forward to it,” he says. “I’m relishing the opportunity to develop the natural gas industry in Western Australia.”

“The Liberal Government is committed to returning the quality of Western Australia’s energy supply network to world-class standards.”

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