Page 12 - GLNG Week 34

GLNG COMMENTARY GLNG

Coast pipeline from seeing the light of day, but
ensured that cheaper supplies of LNG would also
be much harder to secure.

Ring-fencing
WA Premier Mark McGowan said earlier this
month that the sale of production from future
onshore natural gas projects, barring a single
project, to the East Coast or overseas buyers
would be prohibited.
He said he wanted to avoid a repeat of the
price volatility seen in the country’s eastern
market, adding: “Western Australia’s domes-
tic 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 made one exemption, allowing the Wait-
sia project to fill capacity at the Karratha Gas
Plant and export some of its production as LNG
“for a short period of time”. Traditional offshore
LNG projects, which are already required to importing the fuel via a AUD250mn ($181.1mn)
ring-fence 15% of their feedstock production facility at Crib Point in Victoria were derailed by
for the local market, will not be affected by the the Mornington Peninsula council.
changes. The local authority’s August 18 rejection
The policy move garnered its fair share of of the plan, with assertions that the proposed
disparagement. The Australian Petroleum Pro- development fell “short of demonstrating that
duction and Exploration Association (APPEA) potentially significant environmental impacts of
warned that such marketing restrictions could the project can be acceptably managed”, means
see the development of new energy resources that project start-up is likely to be delayed until
“stifled”. 2023.
“A recent APPEA survey showed 89% When the projects do eventually get up and
of members surveyed have deferred project running – an apparently unavoidable necessity
investment as a result of COVID-19. Today’s according to AEMO, which has warned that East
announcement by the WA government serves Coast gas shortages could emerge by the middle
only to reduce investment confidence even fur- of the decade – they will have to compete with
ther,” APPEA WA director Claire Wilkinson said international buyers for any cargoes.
on August 17. Prior to WA’s export ban, East Coast buyers
Former WA premier Colin Barnett, mean- would have been able to tap into the state’s ring-
while, labelled the move a “betrayal” of the fenced gas supplies at a cheaper price than those
eastern markets. He said: “To ban exports of gas sold via existing LNG projects.
from Western Australia to the East Coast I just APPEA’s Wilkinson said: “WA’s domestic gas
think is un-Australian. It’s an appalling policy to market has been well supplied for many years,
adopt.” with locally focused developments bringing sig-
While the move renders the NCC’s sugges- nificant gas supplies into the WA market.”
tion of cross-country pipeline a moot point Prior to McGowan’s ban, there was little to
– highlighting just how difficult it will be for stop importers on the East Coast from under-
Morrison to co-ordinate a national energy strat- writing new onshore projects in WA to feed LNG
egy while state leaders prioritise local needs – shipments to consumers on the other side of the
also makes opening a west-east LNG shipping country. Feedstock costs would be comparably
corridor a much more challenging prospect. lower, after all, as would transportation costs.
The perceived risk for WA, however, is that a
Import options growth in west-east LNG cargoes would strain
Eastern Australia has a number of gas import the local market and drive up prices.
projects – built around floating storage and As the situation stands now, if these new East
regasification units (FSRUs) – on the drawing Coast import projects wish to buy Australian
board. LNG, they will be doing so via traditional LNG
Viva Energy is one such potential developer, terminals that already have long-term clients.
having thrown its hat in the ring in July when it As such, the East Coast can expect to pay more
announced plans to build an import terminal in for the gas coming out of WA than it might have
Geelong. This will be part of a larger energy hub prior to the ban. All this means that prices on the
that will also include solar generation, hydrogen East Coast are only likely to soar as the market is
manufacture and fuel storage. linked ever more closely to international pricing
The company said on August 17 that it aimed trends.
to start preliminary design work on the terminal While Morrison’s government may tout eco-
before the end of this year. Viva’s project could nomic recovery through lower gas prices, the
allow it to become the country’s first operational long-term outlook suggests a very different sce-
LNG importer, after AGL Energy’s plans to begin nario is already unfolding.™

P12 www. NEWSBASE .com Week 34 28•August•2020