Gas Reform In Western Australia Including Upstream

Centre for Mining and Energy

Upstream Gas Regulation and Competition Reform

Sydney

14-15 October 1998

K Peter KolfOffice of Energy - Western Australia

Overview

History of Gas Reform in WA

Gas Industry in WA

Downstream Access Arrangements

Upstream Access Issues

Benefits to Western Australia and Australia

History of Gas Reform in Western Australia

Gas has been top on the agenda in WA

WA - an early leader in gas reform

Bipartisan support for gas reform

Encouraged recovery of associated gas -

since the early 90’s

Gas Reform in WA

Diversified WA gas market not accident

Disaggregation of NWS contract

Deregulation of Pilbara market

$2.4 billion privatisation of DBNGP

Totally open market by 1 July 2002

Sale of AlintaGas under consideration

> 75% of Australian natural gas resources

700 PJ natural gas produced in 1996/7

281 PJ natural gas used in WA in 1996/7

Gas resources - approx 100 years left

LNG from NW Shelf - 10% of world trade

Natural Gas inWestern Australia

Domestic Gas Supplies1997 (TJ/d)

Carnarvon Basin

BHP Petroleum (Australia) Pty Ltd Griffin Gas Gathering 17

Boral Energy Resources Ltd Tubridgi 21

West Australian Petroleum Ltd Thevenard Island Gas Gathering 12 50

East Spar Joint Venture East Spar 40

Harriet Joint Venture Harriet Gas Gathering 79 119

North West Shelf Gas JV NWSG Project 428 428

Perth Basin

Boral Energy Resources Ltd Beharra Springs 29

CMS Gas Transmission of Aust. Dongara 11

Phoenix Energy Pty Ltd Woodada 4 44

North West Shelf Gas

Largest Australian resource development project

» Total capital outlay $12 billion

» Sale of natural gas to the domestic market

» Export of LNG and LPG (primarily to Japan)

» Sale of condensate to the local and

international oil market.

Gas Pipelines Access (WA) Bill 1998

Makes the National Access Law a law of WA

Gives legal effect to the Code

Formalises derogations & transitional arrangements

Expected to commence in WA end of November

1998

Derogations for DBNGP, GGP & SWDS to 1/1/2000

WA’s Code Bodies

» State-based Independent Gas Pipeline Access Regulator

» State-based Gas Disputes Arbitrator

» State-based Gas Review Board

» The Supreme Court of Western Australia

» Designated State Minister

Natural Gas Upstream Issues

The Upstream Issues Working Group (GRIG) Consultation paper - submissions by 25

September Key Issues:

(impact on downstream competition)1. Acreage Management Systems

2. Third Party Access to Upstream Facilities

3. Marketing Arrangements

Access To UpstreamInfrastructure

No restrictions on entry to upstream Market access available Access to sales gas pipelines available Government not involved commercially Market becoming more mature Is anything more needed ?

The Varanus HubWA Domestic Gas

Harriet & East Spar Joint Ventures:

Have sold 220 TJ/d to South West and Goldfields

industrial markets;

Are increasing capacity to eventually supply 500 TJ/d

Export in excess of 3 mmbbls pa of crude and condensate

Have negotiated access to Harriet’s Varanus Island

facilities and the sales gas pipeline.

The Varanus HubUpstream Access in WA

A negotiated, commercial arrangement

Harriet provided access to leases, crude storage and load

out and sales gas pipeline

East Spar constructed its plant and pays tolls to Harriet for

use of infrastructure

Each Joint Venture supports the other increasing

customer’s supply reliability

Both Joint Ventures funding a share of a second gas

pipeline to shore

Benefits To Western Australia

Competitive gas prices Diversification in gas supply World competitive gas industry World class oil & gas expertise Competitive resource development Downstream processing & development High export earnings

Natural Gas DemandWestern Australia

0

50

100

150

200

250

300

1974 1977 1980 1983 1986 1989 1992 1995

PJ

Independent

Govt Utilities

Upstream Use

Environmental Outcome

In 1996-97: Primary energy demand decreased by 1% Final energy demand increased by 2.6% Carbon dioxide emissions decreased by 1.7%

Why? decrease in primary energy use change in the mix of primary energy i.e.

(i) increase in the contribution of gas

(ii) decrease in coal, oil and condensate

Conclusions

» Access by commercial negotiation working in WA

» Access assisted by Government open market approach

» Fundamentals support efficient outcomes & international

competitiveness

» Environmental benefits from sharing facilities

» WA not seeking to impose new mandatory access

regulations

» WA would support a voluntary code that states

commercially realistic principles