The WA gas supply war  

The Business Spectator has a look at the latest salvoes between domestic Australian natural gas users and LNG exporters in WA   - The WA gas supply war.

Neither side will take a backward step in the battle over domestic gas supply in the Golden West.

In one corner we have the DomGas Alliance, speaking for big consumers, complaining that Western Australia "has the most anti-competitive gas market in the country" and in the other the upstream petroleum producers arguing, in the words of a recent newspaper headline, "we can't afford to hand the industrial giants a free ride."

Belinda Robinson, chief executive of the Australian Petroleum Production & Exploration Association, is hammering away at DomGas in response to the Alliance's warning that a domestic gas shortage will last until at least 2020 – while the gas producers pursue international LNG markets – and that the prices being asked will preclude development of "a lot" of future mine projects.

From APPEA's perspective, the problem is that large energy-using companies receiving international market prices for their products do not want to pay global parity rates for their gas. Don't ask our industry to subsidise the input costs of other businesses, argues Robinson.

Tony Petersen, chairman of the DomGas Alliance, wants the WA government to "give teeth" to a policy to reserve offshore gas for domestic use, claiming a 300 per cent increase in North-West Shelf Joint Venture prices to distributor Alinta. Petersen argues that WA customers are being forced to pay premiums to producers in excess of any obtainable by the gas suppliers from overseas customers.

Not dealing with the issue, he says, will lead to thousands of job losses among industrial users of gas because, at existing prices, major resource processing and gas-fired generation will not be sustainable.

Robinson retorts that, if the Alliance gets its way, every WA householder and small business will bear the consequences, forecasting that gas production investment will falter, supply will shrink and prices will rise still further.

Gas is a bigger deal in the west than it is on the eastern seaboard. It provides half of the State's energy and fuels 60 per cent of its electricity generation. ACIL Tasman say gas prices in the State have risen four-fold in a decade and may keep rising until adequate supply becomes available.