The report’s author, Argonaut Securities’ analyst Ian Christie, says not only are the days of $2 gas gone, but a short-term supply gap will push prices to spike between $7-10 per gigajoule in the next two to three years until new supply kicks in early next decade.

Mr Christie said his research also showed little respite in the longer term, with the costs of finding, developing and producing gas picking up sharply.

“The four Ds – gas is more distant, deeper, dirtier and dryer – will ensure a higher floor for prices even when new supply comes on stream,” he said.

“WA gas prices have been out of line internationally for some time, and a sharp realignment was always on the cards.

“LNG producers for example, who are enjoying rapidly growing export demand and negotiating prices above $10 per gigajoule, will be seeking competitive prices for gas sold domestically.”

The Argonaut report indicates WA’s mining, minerals processing and electricity generating sectors use 95% of the domestic gas produced. Households, while politically important, use only 5%.

Christie said it was no surprise WA energy demand had surged, given that it had been the fastest-growing state in Australia over the past five years.

Nor was demand growth likely to slow, as ABARE reports nearly $20 billion has been earmarked for the development of WA mining projects.

According to Christie, the winners will be companies that could deliver uncontracted gas into this strongly growing demand, with the likes of Santos and potentially Tap Oil and Arc Energy, in a strong position to negotiate terms.

But, large commercial consumers, such as new mines that had not yet tied down their energy requirements, could lose out.

“Assuming they can even get the gas supplied, they are likely to have to pay up to get it,” he said.

While WA is well endowed with plentiful natural gas reserves, all consumers – domestic and business – should prepare for inevitable higher prices, he warned.