The Federal Government is considering carving out Western Australia from its proposed Domestic Gas Reservation scheme, sparking criticism from the Queensland Government.
Western Australian Premier Roger Cook said the federal government had assured him the state’s long-held 15% domestic gas reserve would stand despite the introduction of a new 20% Domestic Gas Reservation scheme.
Related article: Australian Govt introduces Domestic Gas Reservation bill
However, the Queensland Government said such a carve-out would place an unfair burden on its gas producers.
WA’s LNG exporters are well behind on their domestic gas supply obligations, supplying just over half of the required volumes by 2023.
Woodside’s Pluto project has reportedly supplied less than 4% of its gas production from its Pluto facility, which is well below the state’s 15% reservation requirement.
This is because there are no requirements on when companies should provide gas to the domestic market—they can do it at any time during the project’s lifetime.
The federal Domestic Gas Reservation scheme could specify how much gas needs to be provided each year, which would complement rather than duplicate state policy.
IEEFA lead analyst for Australian gas Josh Runciman said a carve-out could pose considerable risks of a gas shortfall in WA.
“There are growing calls for Western Australia to be carved out of the upcoming federal gas reservation scheme given it has its own framework in place, but the reality is WA’s framework has serious limitations that has the Australian Energy Market Operator (AEMO) forecasting shortfalls,” Runciman said.
“The Australian Government should retain the ability to intervene if needed to protect domestic gas-using industries. Extending the federal gas reservation policy to WA is the state’s best hope to avoid shortfalls in the coming years while keeping gas prices down.”
IEEFA analysis shows that diverting small amounts of gas that would otherwise be exported as spot LNG (i.e. not to meet existing LNG contracts) would be enough to avert shortfalls.
Related article: EPA warns of environmental risks from Browse gas project
This could be done within the current WA supply requirements, if the federal domestic gas reservation policy required them to be supplied in shortfall years.
