Energy crisis warning for WA
WA is hurtling towards an energy crisis within six years, with Energy Minister Mike Nahan warning that the State's biggest domestic gas supplier will leave the market by 2020.
In the strongest comments from the State Government on the subject, Dr Nahan said the North West Shelf joint venture partners "clearly" did not want to supply local gas users when the last of their long-term contracts expired at the end of the decade.
The North West Shelf is WA's biggest domestic gas producer, supplying about half the market, including much of State-owned electricity provider Synergy's needs.
But there are fears among big gas users that the NWS project's partners will direct remaining reserves to the lucrative Asian liquefied natural gas market rather than locally when their domestic obligations are fulfilled.
If the NWS was to stop supplying the domestic market after 2020, domestic gas prices would soar and thousands of jobs could be at stake.
Aluminium giant Alcoa, which takes massive amounts of gas from the NWS, is uncontracted beyond 2020 and there are serious concerns about whether it will be able to secure enough gas to continue operating if the NWS leaves the local market.
Alcoa has three alumina refineries in the South West at Kwinana, Wagerup and Pinjarra, and operates two bauxite mines at Huntly, near Dwellingup, and Willowdale, near Waroona.
Alan Cransberg, Alcoa's Australian operations boss, warned the company's viability could be threatened if the NWS walked away from domestic users.
"It is amazing that, despite this State having Australia's largest gas reserves, WA domestic gas users are staring down the barrel of a substantial gas shortage in a matter of a few years, regardless of price," Mr Cransberg said.
"Without the North West Shelf, the WA domestic market will be short of gas within the next five to six years.
"This shortfall poses a significant threat to the viability of value-add facilities in WA, including Alcoa."
Dr Nahan said the possible departure of the NWS from the domestic gas market was one of the biggest issues facing WA.
He said even though extra supplies were coming on stream from the Gorgon and Wheatstone projects, they would not be enough to fill the gap.
"North West Shelf is not entering the market for replacement sales so our largest supplier of gas - 60-odd per cent of our gas - is dropping out of the market by the end of this decade," he said.
"It's clear from what I see that North West Shelf does not want to be on the market for domestic gas when their contracts run out.
"The feedback I get, overwhelmingly, from all players in the market is that our dominant gas supply evaporates at the end of the decade.
"It's one of our big development challenges.
"We have a major industry - the bauxite processing industry - that employs thousands of people, that came here based on low-priced gas from the North West Shelf, that has worked well now for 30-plus years but which has to find replacement gas.
"And it's not just quantity, it's also price.
"What Alcoa and the alumina industry do is a major issue for this State."
The Independent Market Operator noted recently that for the NWS to keep supplying the local market it would have to invest in developing remaining untapped reserves and refurbish the 30-year-old Karratha gas plant.
A NWS spokeswoman said no decisions had been made about supplying the domestic market beyond 2020.
"The NWS is a mature project with the majority of proved reserves either produced or committed to existing domestic gas and LNG contracts," she said.
"The development and marketing of uncommitted gas reserves is subject to a series of future investment decisions and relevant government approvals."
