Sydney Liberal says WA domgas policy doesn't work, WA says, wait, what? 

YESTERDAY Liberal Party member for the Sydney safe seat of Mackellar Jason Falinsky claimed Western Australia’s policy requiring 15% of gas from LNG projects be reserved for domestic use cost WA A$410 million per annum and dis-incentivised exploration.
Sydney Liberal says WA domgas policy doesn't work, WA says, wait, what?  Sydney Liberal says WA domgas policy doesn't work, WA says, wait, what?  Sydney Liberal says WA domgas policy doesn't work, WA says, wait, what?  Sydney Liberal says WA domgas policy doesn't work, WA says, wait, what?  Sydney Liberal says WA domgas policy doesn't work, WA says, wait, what? 

Wheatstone

Writing in the Australian Financial Review he said the figure came from research from University of Western Australia economist Kelly Neill and was part of a larger boradside against calls for an east coast doemstic gas reservation policy. 
 
In a release of early 2016 - before some of the state's major export concerns began shipments of LNG -UWA said Neill's research suggested the cost to WA could be up to $1.1 billion per year. 
 
"My findings show the policy will increase the amount of gas sold in the WA market, especially with the opening of the Gorgon and Wheatstone projects," she said.
 
"However, to sell that extra gas on the domestic market, the domestic gas price needs to be lower than it would have been without the reservation policy. This is a loss for gas producers, but a gain for gas consumers."
 
The loss would, of course, depend on international prices. She also suggested there could be impacts on exploration or Australia's reputation as a place to invest. 
 
Falinsky's op-ed claimed the policy "reduces the incentives for exploration, thereby reducing supply in the long term", which  is news to a few, not least the Perth Basin's newest explorer Strike Energy, which is drilling the West Erregula-2 well. 
 
Managing director Stuart Nicholls told Energy News that he didn't think the domgas reservation policy had reduced investment at all. 
 
"With all the additional infrastructure that has been built during the LNG boom in WA (all through the Domestic Market Obligation era) the DMO period has done the exact opposite if anything," he said.  
 
Nicholls, along with representatives from Triangle Energy, Beach Energy and APPEA, spoke at the Western Australian Petroleum Club dinner in May, an event dedicated to the Perth Basin and one of the most-attended events of the year. 
 
The Perth Basin ‘renaissance' kicked off first by the huge Waitsia gas find the Xanadu-1 oil discovery, has, if anything, turbo-charged M&A, acreage buys and exploration.  
 
"Additional infrastructure (and associated domestic gas plants) provides multiple pathways to market for resource holders and therefore additional development potential of prospective resources that would not meet standalone economic cut-offs," Nicholls said. 
 
He suggested an upcoming challenge could be coaxing infrastructure owners and resources owners to cooperate rather than ending up in the "possible ‘Mexican stand-off' in seeing who can wait out the other for the longer period of time". 
 
Woodside Petroleum managing director Peter Coleman also praised the initiative in a speech to the Melbourne Mining Club last year.  
 
"The domestic gas reservation policy has existed in some form in WA since the North West Shelf Agreement was signed in 1979," he said. 
 
"It is true that the industry has at times railed against the progressive tightening of the policy. But we have learned to accommodate it - and the upshot is that domestic gas and LNG for export are no longer perceived as being conflicting priorities. In WA, their relationship is symbiotic. "
 
Woodside plans to take final investment decision on its next two brownfield LNG projects Scarborough and Browse in 2020. 
 
Western Australia's Domgas Alliance spokesperson Richard Harris released a media statement today in response to questions from Energy News, saying "it has not impacted at all on gas exploration onshore or offshore, evidenced by major activity to develop projects for both LNG export and onshore domestic consumption".
 
"Onshore major gas projects with a domestic focus such as Waitsia have developed in parallel with the reservation policy for LNG projects," he said.
 
"The reservation policy has ensured WA has a vibrant domestic gas market which has fuelled mining and minerals processing projects, fertilizer production and gas fired power generation. This domestic market in turn drives further exploration - because of the reservation policy which kick started the market."
 
He cited an ACIL report that suggested in 2016-17 "the domestic gas supply chain generated output to the value of $30.9 billion and accounted for almost 18,000 direct FTE jobs."
 
That report also found gas purchased by local industry generated $165 billion worth of economic activity. 
 
The chief of Manufacturing Australia, Ben Eade, earlier this week claimed in the Australian Financial Review that gas dependent east coast businesses were considering moving the United States where gas is cheap and plentiful, and exploration encouraged in many states. 
 
Premier Mark McGowan has suggested that east coast businesses affected by high prices for scarce gas should consider heading west before they move offshore.