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State blocks exports of onshore gas in quest for cheaper energy, but one project receives exemption

The WA government will block the export of gas to the eastern states and overseas from all future onshore gas projects, except one.

On Monday WA Premier Mark McGowan announced changes to the state’s domestic gas policy that would prevent the export of onshore gas extracted in WA in an effort to bring down energy prices.

The only project to gain an exemption from the new policy is the Waitsia project in the Mid West, a joint venture between Japanese conglomerate Mitsui and Co and Kerry Stokes-backed Beach Energy.

The Waitsia gas field is regarded as one of the largest gas fields ever discovered onshore in Australia. The joint venture bosses are currently mulling over a final investment decision, whether to drill more wells and build a production facility capable of producing 250 terajoules of gas per day. Chevron’s domestic gas plant on Barrow Island produces about 300 terajoules a day.

Woodside also announced on Monday it had struck a non-binding agreement with its North West Shelf partners to process gas from Waitsia at its Karratha Gas Plant from 2023, which would then be exported overseas.

Mr McGowan’s statement said the Waitsia project received an exemption “for a short period of time” due to the exceptional economic circumstances created by the COVID-19 pandemic.

“The Waitsia Gas Project Stage 2 in the Mid West is an exception to the policy. Once sanctioned, it will provide urgently needed jobs, royalties and economic stimulus for the region and the state,” he said.

A state government spokesman said arrangements were being finalised to allow the export of around 50 per cent of current Waitsia reserves and the exemption would last around 5 years from the beginning of operations.

The amended policy also requires increased reporting by gas producers so the industry knows who is supplying gas and how much is available.

Mr McGowan said the government wanted to avoid the problems occurring on the east coast where the majority of its gas was sent overseas, which inflated local prices.

“Western Australia’s domestic gas policy is the envy of the nation, and the updated policy will ensure our state can continue to access reliable and affordable gas,” he said.

“These amendments ensure the policy remains fit for purpose by clarifying that the state government will not agree to exports of local gas to the eastern states or overseas.”

Mr McGowan said there would be no change to traditional offshore LNG projects such as Browse and Scarborough, which would be required to keep 15 per cent of their extracted gas for the domestic market if Woodside decides to go ahead with them.

In addition to the Waitsia gas, Woodside announced the Karratha Gas Plant could also process gas from its Pluto fields when the North West Shelf starts running dry.

Woodside chief executive Peter Coleman said the agreement to process Waitsia and Pluto gas unlocked further value from the Karratha Gas Plant.

“The processing of third-party gas resources will extend the operating life of the NWS Project and ensure KGP continues its significant contribution to the Australian and Western Australian economies for years into the future,” he said.

“The tolling of third-party gas at KGP provides new revenue and LNG exports, and an additional domestic gas commitment for Western Australia from Pluto.

“We look forward to working with all parties and the government of Western Australia over the coming months to finalise the project agreements and regulatory approvals.”

On the back of solid results for 2019-20 Beach Energy (ASX: BPT) finished the day 7.1 per cent higher at $1.58, netting its biggest shareholder Seven Group Holdings $65 million.

Source: Sydney Morning Herald