Western Australia Seeks to Diversify Natural Gas Market

---

Researched by Industrial Info Resources Australia (Perth, Australia)--The vast distance and desolate environment that separates Western Australia from the rest of the country has caused Western Australia's natural gas industry to develop independently from the rest of the country.

This has resulted in some problems, such as the 2008 Western Australia gas crisis, which was caused by an explosion at Apache Energy's (NYSE:APA) (Houston, Texas) gas plant on Varanus Island. At the time, Apache supplied about one-third of the state's gas supply. The incident, caused by the rupture of a corroded pipeline and subsequent explosion at a processing plant, caused a gas shortage that lasted about six months. Without a transcontinental pipeline linking Western Australia to the east coast, supplies were not re-established until staff were able to repair the damage at the Varanus Island plant.

Conversely, the lack of connection between the two sides of the Australian gas network has numerous benefits for Western Australia. Currently, the east coast gas network is facing a pending gas shortage. Most new work on the east coast has been undertaken to establish sufficient supply for the three liquefied natural gas export plants that are under construction on Curtis Island. In addition, many current domestic supply contracts are coming to an end and are not being renewed, as suppliers opt to also supply the LNG export industry.

Australian manufacturers and federal Industry Minister Ian Macfarlane are worried about this situation, fearing that LNG export terminals will act like giant vacuum cleaners, sucking up all the gas that can be produced to fulfil export contracts.

Macfarlane says that in order to continue to supply a domestic demand of 13.7 million tonnes, and produce 25 million tonnes for export, east coast gas production will have to triple in the next few years to approximately 39 million tonnes. He also says gas prices will rise to export parity, which means a doubling or even tripling of the current price.

Western Australia is the only state that has a gas reservation policy in place: 15% of all gas produced within the state must be supplied to meet domestic demand, before anything can be exported. Some industry leaders are urging New South Wales, Queensland and Victoria to follow Western Australia's lead and implement a similar policy in order to avoid the pending gas shortage.

With an established gas industry in the state's northwestern area, Western Australia is looking forward to a steadily increasing supply of natural gas over the next few years. In response to the 2008 shortage, a gas storage facility has been constructed at Mondara with 15 PJ of useable gas storage capacity. Supply into the Western Australian market has also diversified, with the Pluto Gas Plant beginning to supply the domestic market in 2012, and the Gorgon and Wheatstone projects expected to be complete in the next few years. These three large projects, along with a number of smaller projects sourcing gas from onshore basins, means the Western Australian market will not depend on any one source.

Australia still has substantial natural gas resources yet to be developed. It is also on track to become one of the largest exporters of LNG, with some analysts predicting Australia will become the largest by 2017. However, without some measures in place to ensure enough gas stays onshore, Australian consumers will likely be facing continual price increases and energy shortages.

View Project Report - 86000906 86000905 86000975 86000854 86000870

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, three offices in North America and nine international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.