Page 7 - AsiaElec Week 35

AsiaElec COMMENTARY AsiaElec

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

Week 35 02•September•2020 www. NEWSBASE .com P7