WA Domestic Gas Policy

Policy
The Western Australian Government’s Domestic Gas Policy aims to secure WA’s long-term energy needs and ongoing economic development by ensuring that LNG export project developers also make gas available to the domestic market.

Around 90% of Australia’s estimated recoverable conventional gas reserves are located in the Carnarvon and Browse basins in Western Australia's north west. These gas fields support WA’s liquefied natural gas (LNG) export industry, as well as our domestic gas market. 

The policy seeks to make gas equivalent to 15% of exports available for WA consumers.

LNG exporters’ domestic gas commitments complement supply from domestic-only projects using the WA gas pipeline network. Gas in the WA pipeline network is not for export.

The WA Domestic Gas Policy

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LNG projects must demonstrate their ability to meet the policy as a condition of project approval. The WA Government applies the policy in a flexible manner.

LNG projects will commit to making domestic gas available by:

  • reserving domestic gas equivalent to 15% of LNG production from each LNG export project
  • developing and obtaining access to the necessary infrastructure (including a domestic gas plant, associated facilities and offshore pipelines) to meet their domestic gas commitments as part of the approvals process
  • showing diligence and good faith in marketing gas to the domestic market.

LNG exporters are required to report on their efforts and are subject to independent review. Their obligations, progress in how they are being met and gas supplied and available for local consumers will be transparent to the market.

Projects are required to undertake these actions such that domestic gas is available to coincide with the start of LNG production. The timing may vary depending on project circumstances. Prices and contracts for domestic gas will be determined by the market. Any unsold gas must be reserved and made available in support of economic and industrial development.

Projects may propose to offset their domestic gas commitments by supplying gas or other energy from alternative sources, rather than supplying gas from their LNG projects. Offsets must provide a net addition to WA’s domestic energy supply.

The policy is given effect through long-term contractual arrangements between developers of LNG export projects and the WA Government. These agreements are struck at project inception to provide certainty for LNG project developers and allow for a sustained supply of gas into the local market.

We will communicate any agreed changes to contractual arrangements with LNG exporters to the market as they arise. Clarifications on the application of the policy, including for exporters contemplating using gas from the WA pipeline network, are noted below.

Development and application of the policy

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Successive WA Governments have maintained a domestic gas policy since helping underwrite the North West Shelf LNG project in 1979. The policy was first formalised in 2006 and further clarified in 2012 and 2020.

The policy has been given effect through domestic gas agreements struck with LNG project developers. The nature, specifics and confidentiality of the agreements have varied over time.

Domestic gas supply commitments with the Gorgon (2003) and Wheatstone (2011) LNG projects are now replacing longstanding historical supply from the North West Shelf. Further supply from the North West Shelf has also been secured through a 2015 agreement. Information on domestic gas agreements struck with the state, progress on the implementation of the agreements and recent developments relating to the policy are discussed below.

Closer integration between domestic and export gas markets in Western Australia and on the east coast is affecting local gas supply. The WA Government has made a number of clarifications on the application of the policy, noted below, in order to preserve the integrity of the policy and local gas market.

Export via the existing WA domestic gas pipeline network

The WA gas market relies on LNG exporters’ WA Domestic Gas Policy commitments and gas from domestic only producers. Gas in the WA pipeline network is readily accessible to local consumers and needs to support WA's economic and industrial development.

The WA Government will not agree to the export of gas via the existing WA pipeline network other than in exceptional circumstances.

Other forms of gas export

Domestic gas is for WA consumers. Supply of gas to markets on the east coast, whether via an LNG import terminal or a pipeline connection to east coast gas markets, is an export for the purposes of the policy.

LNG used in international shipping is also an export. Marine fuel is a substantial market opportunity for the LNG industry and the WA Government is supporting the development of ship fuelling infrastructure in the Pilbara.

Implementation of the policy

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The Department of Jobs, Tourism, Science and Innovation implements the policy for the Minister for State Development, Jobs and Trade.

This involves:

  • Updating the policy and its application in line with the development of the LNG industry.
  • Negotiating contractual agreements with LNG exporters to give effect to the policy.
  • Monitoring implementation of the agreements in place.

Operating domestic gas agreements

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There are 4 current domestic gas agreements. Progress on implementation of each is summarised below.
Agreement
(LNG project, operator, date)
Reserves
2P, 2020 1
LNG Export Capacity Indicative Domgas Commitment Domgas Supplied
Barrow Island Act 2003
(Gorgon, Chevron, 2003)
40.4 TCF 15.6 mtpa

300 TJ/day
(2,000 PJ)

166 PJ 2

Gorgon domestic gas is being marketed in 2 tranches. The 300 TJ/day Gorgon domestic gas plant is constructed and commenced supply of the first tranche of about 150 TJ/day in 2016. The first tranche was sold jointly. Supply of the second tranche is expected by 2021 and is being individually marketed by the Gorgon joint venture companies.

Agreement
(LNG project, operator, date)
Reserves
2P, 2020 1
LNG Export Capacity Indicative Domgas Commitment Domgas Supplied
2006 Pluto Domgas Arrangements
(Pluto, Woodside, 2006)
3.2 TCF 4.9 mtpa 115 TJ/day
(450 PJ)
2 PJ

Pluto’s domestic gas commitment took effect from 12 May 2017 and is equivalent to 115 TJ/day, based on current LNG export capacity. Woodside commissioned a 25 TJ/day Pluto pipeline gas facility in December 2018 and constructed a domestic LNG truck loading facility at the Pluto site which opened in April 2019 with an initial capacity of 0.1 MTPA (equivalent to 15 TJ/d). Woodside markets Pluto gas on behalf of the joint venture.

We are in discussions with Woodside about when and how it intends to meet the full Pluto commitment. In the meantime, Woodside is reserving gas against the Pluto commitment.

Agreement
(LNG project, operator, date)
Reserves
2P, 2020 1
LNG Export Capacity Indicative Domgas Commitment Domgas Supplied
Gas Processing (Wheatstone Project) Agreement
(Wheatstone, Chevron, 2011)
11.4 TCF 8.9 mtpa 200 TJ/day
(1,600 PJ)
23 PJ

The 200 TJ/day Wheatstone domestic gas facility is constructed and the first deliveries of gas commenced in March 2019. The joint venture companies market gas on an individual basis.

Agreement
(LNG project, operator, date)
Reserves
2P, 2020 1
LNG Export Capacity Indicative Domgas Commitment Domgas Supplied
North West Gas Development (Woodside) Agreement Amendment Act 2015
(NWS, Woodside, 2015)
8.5 TCF 16.9 mtpa 90 TJ/day 3
(660 PJ 3)
56 PJ 3

The original North West Shelf State agreement domestic gas commitments concluded in 2014. From 1984 to the end of 2014, the North West Shelf project supplied 5,124 PJ to the domestic market.

In 2015, the joint venture assumed a new domestic gas commitment in exchange for an 86 mt LNG export approval. The 2015 commitment provides for a regular and stable supply of domestic gas. Joint venture companies began supplying individually in 2016 and market gas on an individual basis.

During negotiation of the 2015 commitment, the North West Shelf Joint Venture struck domestic gas contracts for 42.743 PJ of gas. This volume is counted towards the new commitment. The joint venture continues to supply these and other pre-2015 contracts extending to 2020. At end 2014, 757 PJ of gas remained to be supplied under these contracts.

Future users of the facilities are required to enter into domestic gas commitments consistent with the terms of the North West Shelf state agreement. In March 2020, a 25-year extension of to the state agreement was legislated to accommodate future backfill project timeframes.

The domestic gas agreements in the WA gas market

At current levels of demand, the gas supplied under the Gorgon, Wheatstone and North West Shelf domestic gas agreements will be able to meet around half of WA’s gas needs over the next 2 decades. Domestic-only producers currently supply half of the market.

Western Australian Gas Market Graph - February 2020

 

1: Remaining reserves at 1 January 2020. Source: Wood Mackenzie, Asset Reports May to July 2020. The data and information provided by Wood Mackenzie should not be interpreted as advice and you should not rely on it for any purpose. You may not copy or use this data and information for any purpose except as expressly as permitted by Wood Mackenzie in writing. To the fullest extent permitted by law, Wood Mackenzie accepts no responsibility for use of this data and information except as specified in a written agreement with Wood Mackenzie for the provision of such data and information.

2: Source WA Gas Bulletin Board to end 2019.

3: Net of the 42.743 PJ contract volumes (refer comments).
Abbreviations: TCF = trillion cubic feet, mtpa = million tonnes per annum, mt = million tonnes, PJ = petajoule, TJ = terajoule.

Domestic gas marketing contacts

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Companies in WA LNG project joint ventures individually market their share in domestic gas obligations. Domestic-only producers also supply the WA market.

North West Shelf

Company Name Title Email & telephone
BP Amanda Wilson Domestic Gas Marketing Manager

amanda.wilson@se1.bp.com

08 9420 1836

BHP Katrina Dickson Principal, Sales

katrina.dickson@bhp.com

08 6321 3683

Chevron Sieu Vuong Marketing Manager Domestic Gas

sieu.vuong@chevron.com

08 6224 1428

MIMI Kevin Nagamany Senior Marketing and Business Advisor

kevin_nagamany@mimi.com.au

08 9429 9719

Shell Wendy Ng GM Physical Trading West

wendy.w.ng@shell.com

08 9338 6659

Woodside Alexandra Willis Pipeline Gas and Trucked LNG Marketing Manager

alexandra.willis@woodside.com.au

08 9348 6546

Gorgon

Company Name Title Email & telephone
Chevron Sieu Vuong Marketing Manager Domestic Gas

sieu.vuong@chevron.com

08 6224 1428

ExxonMobil Adrian Hamra Commercial Manager

adrian.p.hamra@exxonmobil.com 

0498 065 100

JERA* Kathryn Slater Commercial Adviser

kathryn.slater@jeraaustralia.com.au

08 9421 8917

Osaka Gas Yutaro Oka Deputy Manager

gorgon_equity@ogaustralia.com.au

08 6188 0461

Shell Wendy Ng GM Physical Trading West

wendy.w.ng@shell.com

08 9338  6659

Tokyo Gas
                                
Erisa Kitei Equity Seller Representative

gorgon_equity@tokyo-gas.com.au

08 9425 5105

*JERA is a joint venture between Tokyo Electric Power Co and Chubu Electric Power Co.

Wheatstone

Company Name Title Email & telephone
Chevron Sieu Vuong Marketing Manager Domestic Gas

sieu.vuong@chevron.com

08 6224 1428

KUFPEC Richard de Bont Senior Marketing Officer

AUSKAPLcommercial@kufpec.com

08 9380 3907

Kyushu Electric Kei Takehara Domestic Gas Sales Representative

domgasops@qeaustralia.com.au

08 9200 5840

PE Wheatstone Masazumi Kinoshita General Manager, Commercial

domgas@pewheatstone.com.au

08 9421 8903

Woodside Alexandra Willis Pipeline Gas and Trucked LNG Marketing Manager

alexandra.willis@woodside.com.au

08 9348 6546

Pluto

Company Name Title Email & telephone
Woodside Alexandra Willis Pipeline Gas and Trucked LNG Marketing Manager

alexandra.willis@woodside.com.au

08 9348 6546

Tokyo Gas Enquiries to Woodside
Kansai Electric Enquiries to Woodside

Other WA gas suppliers

Company Name Title Email & telephone
Beach Energy Matthew Mitolo Commercial Manager

matthew.mitolo@beachenergy.com.au

08 8225 3419

Mitsui Ayako Akutagawa General Manager Commercial

Ayako.Akutagawa@mepau.com.au

08 6364 4798

Santos WA Graham Weaver General Manager Marketing, Trading and Commercial

wamarketing@santos.com

08 6218 7200

Warrego Cathy McKeagney General Manager Commercial

mckeagney@warregoenergy.com

0447 983 946

Approved offsets

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Projects may propose to offset their domestic gas commitments by supplying gas or other energy from alternative sources, rather than supplying gas from their own LNG projects.

At present no LNG exporters use offsets to meet their domestic gas commitment. The WA Government will assess offset proposals on a case-by-case basis, taking into account whether an offset arrangement provides an equivalent level of energy security and is consistent with the net additionality requirement of the policy. It will also ensure any offset arrangements are practicable, enforceable, and consistent with broader government objectives.

The government will not contemplate swaps of pipeline gas for LNG exporter domestic gas commitments unless the policy offset requirements are met.

Compliance monitoring and market transparency

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The WA Government is strengthening its focus on monitoring of domestic gas commitments.

LNG exporters report annually on the implementation of their domestic gas commitments. The WA Domestic Gas Policy Reporting Framework sets out our information requirements for LNG exporters’ annual domestic gas obligation reports. We monitor:

  • use of LNG export approvals
  • domestic gas supply against commitments
  • gas reserves
  • domestic supply infrastructure maintenance and access, and
  • marketing activities.

Dispute provisions in LNG exporters’ contractual arrangements with the WA Government provide for independent scrutiny and will be used where required.

The market needs to know when, how and how much gas is available. The WA Government is consulting with industry on an annual statement outlining how much gas is supplied and available under policy commitments. Broader gas market transparency measures will be part of these consultations.

Future policy commitments will be public and require participation in gas market transparency measures.

Presentations and other information

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The Department of Jobs, Tourism, Science and Innovation periodically makes presentations to industry forums on the WA Domestic Gas Policy and the gas market in WA.

Updates to gas industry forums

The Australian Energy Market Operator is responsible for operating the Gas Bulletin Board and preparing the annual Gas Statement of Opportunities for WA.

We provided updates on implementation of the WA Domestic Gas Policy to Australian Energy Market Operator WA Gas Consultative Forums on 12 November 2019 (PDF) and 22 July 2020 (PDF).

The Energy in WA Conference is an annual forum on a variety of energy topics. We made a presentation to a panel session discussing the evolution of the gas market at the Energy in WA Conference on 22 August 2018 (PDF). More recently we presented on 18 September 2019 (PDF).

Please contact us for earlier presentations.

Changes to WA Domestic Gas Policy

On 17 August 2020, the State Government announced changes to the WA Domestic Gas Policy. 

The changes are intended to secure local gas supply, prevent the export of WA gas to the Eastern States or overseas and improve transparency in the sector.

Read the announcement media statement.

The Australian Domestic Gas Security Mechanism

The Australian Government introduced legislation in 2017 that allows it to implement export controls in the event of gas supply shortfalls in the eastern Australian market. The WA gas market is not connected to the east coast and long term contractual arrangements with WA LNG exporters ensure gas is available for WA consumers.

We wrote to the Australian Government about the Australian Domestic Gas Security Mechanism in June 2017 (PDF). On 27 June 2017, the Commonwealth Minister for Resources clarified that Western Australian LNG exporters will not be subject to export controls (PDF) in the event of a supply shortfall on the east coast.

National Gas Reservation Issues Paper

On 27 October 2020, the Australian Government released an issues paper on a prospective national gas reservation scheme. Consultation will help explore the possible costs and benefits of a national scheme.

In our submission on 27 November 2020, we advised that the WA Domestic Gas Policy is working effectively and should not be disturbed if any national scheme is implemented.

Additional information

Additional information on WA gas resources and gas market data provide context for the policy. This information can be sourced from:

Page reviewed 14 December 2020