Western Australia’s phony gas shortage

by Mark Ogge


Western Australia produces much more gas than the state needs and any fears of a shortage is driven by the industry to increase prices

Multinational gas export giants operating in Western Australia are emulating the successful strategy of their counterparts on the east coast of engineering a gas shortage to drive up prices and create pressure on governments to approve huge new export gas projects.

Western Australia is a vast gas producer. If Western Australia was a country, it would be the third largest liquefied Natural gas (LNG) exporter in the world after the US and Qatar. LNG is simply fossil methane gas cooled to a liquid state so it can by put on ships to be exported.

Almost all the gas produced in Western Australia or off the coast of Western Australia is exported. Any domestic shortage is not only driven by excessive exports but could be solved simply by ensuring these companies supply a sufficient amount the gas resources owned by Australians to Western Australians.

In fact, just requiring these companies to comply with their commitments under Western Australia’s domestic gas reservation policy would easily solve the problem.

A Western Australian parliamentary inquiry has found these gas exporters have supplied just 8% of the 15% of gas they are meant to supply under the domestic gas reservation policy.

Since their commitments started, LNG producers have on average delivered around eight per cent of domestic gas relative to LNG exports; just over half of what is required to be reserved under the WA Domestic Gas Policy.

As shown above almost 90% of the gas produced in Western Australia is either exported or used by the export LNG industry to process gas for export. The LNG industry consumes almost thirty-five times the amount of gas that Western Australians use for electricity generation. These companies use 2.5 times the amount of gas used for electricity generation in WA just running their export terminals, making this by far the single largest use of gas in Western Australia.

Instead of simply supplying the amount of gas they are meant to supply to the Western Australian domestic gas market, these companies deliberately under-supply the Western Australian market, and relentlessly use the threat of a potential gas shortage they themselves are engineering to pressure governments to approve their massive new projects that are almost entirely for export.

There is no need for Western Australia to allow enormous new climate-destroying projects when so much of the gas that is already being produced is being exported—especially since those exports bring so few benefits to Western Australians.

Industry cries of “sovereign risk”—along with threats to leave the state if their new projects are not approved—are ridiculous. Multinational oil and gas companies operating in Western Australia receive most of the gas they export royalty free, and often pay little if any company tax or petroleum resource rent tax (PRRT), despite collectively receiving tens of billions of dollars in revenue every year from selling the gas. Whatever their rhetoric, these companies are on an exceptionally good wicket in WA, and they know it.

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