“WA gas will continue to be the bedrock of the WA economy,” McGowan said at the time.
The premier’s own actions now make his prediction look decidedly shaky.
McGowan often boasts of WA’s superior management of energy issues compared to the eastern states.
“Any companies looking for affordable and reliable gas supplies ... should relocate to Western Australia,” he toldThe West Australian less than two months ago.
The east coast gas crisis may force some gas-intensive manufacturers to close,but they are unlikely to invest in a move west when a question mark hangs over the long-term availability and price of the fuel.
Opportunity in interesting times
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AEMO’s forecast explains therecent bidding war between Stokes’ Beach Energy and Gina Rinehart’s Hancock Energy for ASX-listed Warrego Energy which owns half of the West Erregulla field in the Perth Basin.
Rinehart appears to have won after offering about double what Warrego was worth two months ago.
AEMO expects Warrego and its partner Strike to commit to West Erregulla in 2023 and deliver 87 terajoules a day of gas – about 8 per cent of demand – from 2025.
As the WA gas market is dominated by a few large producers and consumers,one or two decisions can swing the market between significant surplus and deficit.
The AEMO base case did not include two projects strongly backed by the WA government – the Perdaman urea project near Karratha and Woodside’s hydrogen export plant in Kwinana – or Strike Energy’s urea plant near Dongara that would each significantly increase demand.
Conversely,possible new gas supply – Mineral Resources’ Lockyer Deep and Strike Energy’s South Erregulla onshore fields and Santos’ Corvus offshore field – were also excluded.
How quickly mining moves away from fossil fuels is another uncertainty,with AEMO expecting iron ore producers to reduce their gas use by a third over the next decade while increasing production.
AEMO noted that gas price-sensitive industries could choose to shut down if gas was not available at a competitive price.
AEMO WA manager Kate Ryan said a small surplus was predicted for two years from mid-2027 when Woodside’s Scarborough project began supplying the local market,but declining gas production and the retirement of coal-fired power stations could cause a large deficit in gas supply from 2030 onwards.
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“The strong linkages between WA’s gas and electricity sectors mean that changes occurring in one sector will have an impact on the other,” Ryan said.
When McGowan announced the closure of Synergy’s coal-fired power stations in June,he said he doubted any new gas-fired power stations would be needed and there was significant spare capacity,but he would not rule it out.
AEMO predicts gas used for power generation on the southwest grid will more than double over the next decade but did not say if this required additional generators.
Ryan said timely investments in new gas developments and storage were needed to maintain a secure and reliable energy system.
WA gas supply has problems now
The tightness of the WA gas market was demonstrated on Wednesday when Strike Energy sold gas from its under-development Waylering field in the Perth Basin,not to a gas user,but to WA’s biggest gas supplier Santos,so it could meet its existing contracts.
Santos will receive an average of 20 terajoules a day of gas for five years starting in the first quarter of 2023,with the option to take more as field production increases.
In early 2021,Santos cut its estimate of gas reserves in its Reindeer field that supplied 17 per cent of the market through the Devil Creek processing plant.