By Ross Verne
SANTOS used its presentation at the Western Australian Annual Resources Review to rally against domestic gas reservation in the state but both sides of politics maintained their priority was cheap energy for the local market.
Santos general manager for WA and NT Brett Woods, speaking at the Committee for Economic Development of Australia (CEDA) event on 17 October, said the company had accepted the policy had bipartisan support but called for more clarity for those looking to invest.
“We don’t want to run the risk of investing in a sector where you could have LNG-scale infrastructure suddenly deliver a domestic obligation that doesn’t support the rest of the industry going about its normal business in a normal market,” Mr Woods said.
“We need more clarity, more certainty about what domestic gas reservation means and what are the structures we are going to have in place so that we can operate efficiently.”
Mr Woods said uncertainty around when domestic supply from the North West Shelf would cease, and a lack of clarity about what Pluto, Wheatstone and the Browse joint venture would deliver to the domestic market were clouding investment decisions.
Premier Colin Barnett said Western Australia relies heavily on its domestic gas and that the policy had not stopped any project going ahead.
Shadow minister for energy Bill Johnston said the economic benefit brought by increased exports would not be enough to counteract the negative impacts of gas price increases on small business or manufacturing.
“It’s rubbish – the employment effect is very small,” Mr Johnston said.
“There would be a high benefit to the federal government in the form of tax revenue but if we start losing jobs in manufacturing then that multiplied benefit will be lost very quickly.”
Mr Woods referred to the federal government’s Energy Green Paper and the state government’s own paper on Microeconomic Reform in Western Australia, saying gas should be priced by the international market.
“To deliver [Gorgon and Wheatstone-style projects] to market requires a much higher price point than I think the industry in Western Australia can support,” Mr Woods said.
“We need to make sure we couple the resources that are easy to extract and deliver those lower prices to our domestic market… not force very expensive LNG projects – which require larger netbacks to make work – try and backfill themselves across the domestic gas space.”
“It is a false economy.”
Mr Johnston said gas was not a fungible product so it was not correct to let international markets set its price.
“It is not a proper argument to say that we should be paying the Japanese price for gas – it’s an artificial price,” he said.
“We are being asked to pay for gas indexed against the price of oil. You don’t pay for iron ore at the price of nickel.”