WA will be awash with domestic gas within 10 years, according to projections that raise questions about whether the State paid too much for landmark contracts with the Gorgon joint venture.
The Independent Market Operator, the body responsible for running WA's wholesale electricity market, forecasts that WA's domestic gas supply will outstrip demand by 74 per cent by 2022.
The assertion, though disputed by WA's Energy Minister and some industry observers, indicates domestic gas prices will come under downward pressure from surging supplies after years of sharp rises.
It also comes after the Government in 2011 sanctioned State-owned utilities Synergy and Verve paying historically high prices for long-term gas contracts with Gorgon, led by US giant Chevron.
Under the contracts, which are set to begin in 2015 when supplies from the North West Shelf wind back, the utilities are understood to have agreed to pay between $6 and $8 a gigajoule for gas.
This compares with the previous $2.50 a gigajoule the utilities paid to the North West Shelf owners and the prevailing price on benchmark international spot markets.
Those markets, which include the Henry Hub in the US, have gas trading at about $3.50 a gigajoule, though there are claims this is unusually low.
In its snapshot of the WA gas market, the IMO said domestic gas supplies would be bolstered as new projects such as Macedon, Gorgon and Wheatstone came online, eclipsing growth in demand.
But Energy Minister Mike Nahan rebuffed the IMO, insisting supplies and therefore prices would remain tight.
Dr Nahan said concern over the availability of gas was a big reason for merging Verve and Synergy because the two combined would be able to negotiate better deals for the Government entities.
He said buying collectively made sense when gas largely came from big operations that collectively sold to the domestic market.Shadow energy minister Bill Johnston said the Government should focus on ensuring the North West Shelf remained a provider.