WA's gas policy has been the envy of the nation, but there are warnings it could become a 'disaster'

ByDaniel Mercer

Posted 4h ago4 hours ago

WA's policy of keeping all of its onshore gas production for local use is coming under increasing pressure. (AAP Image: Kim Christian)

abc.net.au/news/wa-domestic-gas-policy-waitsia-mineral-resources/103370494

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At a site south of Perth in the city's industrial heartland, Grant Lukey looks out at manufacturing equipment worth tens of millions of dollars.

Key points:

• WA government policy bans gas produced onshore from being exported
• But an exemption was given to a plant backed by media billionaire Kerry Stokes
• There are fears of a supply "disaster" should the policy be rolled back further

He's the managing director of Coogee Chemicals, a privately-owned industrial company with operations across the country.

Many of those operations are at least partly run on – or are fuelled by – natural gas.

And in WA it's no exception.

"Gas is critical to Coogee Chemicals," Mr Lukey says.

"But, more importantly, it's important to the state."

Since 2006, Coogee has been a beneficiary of WA's domestic gas reservation policy, which quarantines 15 per cent of offshore project reserves for the local market.

Grant Lukey from Coogee Chemicals is worried WA's gas policy will become the same "disaster" seen in the eastern states. (ABC News: Mitchell Edgar)

For onshore projects, all of the gas is required to be supplied domestically.

As a consequence, prices in the state have been stable and – compared with the eastern states – relatively low.

Gas getting harder to find

But all of that has been changing in WA, where the market recently hit record highs and there are forecasts of a shortage of supplies from as early as 2026.

Mr Lukey says accessing gas – let alone at affordable prices – is getting increasingly difficult.

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"Last year, we were in the market from a joint venture point of view and we had experience in Western Australia where you would expect with the amount of gas in this state you would get multiple offers of natural gas put to you," he says.

"We got one.

"In a state rich with natural gas we got one.

"It's the sign of things to come."

In another sign that worries him, Mr Lukey is seeing parallels between WA and the eastern states, where sky-high prices in recent years, and a shortage of gas for the domestic market, have had a direct effect.

"I am from the east coast myself," he says.

"We had a methanol plant that was operating in the east coast when the LNG plants were being established and built there.

"That methanol plant is now closed down – it's in care and maintenance mode as a direct result of the failure of the natural gas policy on the east coast."

Pressure from heavyweights

Despite that backdrop, there are growing calls from producers for the WA Government to overturn, or at least water down, a ban that prevents onshore gas from going overseas.

The ban was put in place by then premier Mark McGowan in 2020.

But there was one exception – a project known as Waitsia in WA's Mid West operated by Japan's Mitsui and Beach Energy, a company backed by media mogul Kerry Stokes.

The Waitsia onshore gas operation, backed by billionaire Kerry Stokes through his Seven Group — was granted an exemption from the export ban.(AAP Image: Richard Wainwright)

Others are now demanding similar treatment, including Perth mining billionaire Chris Ellison, who has been paying former WA premier Mark McGowan as a consultant.

At his company Mineral Resource's annual general meeting in November, he said he wanted a five-year exemption from the ban for his Lockyer project north of Perth.

In the absence of an export licence, he said the company would not be able to justify building a 250-terajoule-a-day gas plant – capacity equivalent to almost a quarter of demand in the state's south.

Instead, Mr Ellison said, it would have to build a much smaller plant with a capacity of 30 terajoules a day, or enough only for Mineral Resources' immediate needs.

Chris Ellison wants a five-year exemption from the export ban for his Lockyer project north of Perth.(Supplied: Mineral Resources)

"We've had some good talks with the government," Mr Ellison told investors at the time.

"And I'd like to think we're going to get approval to export for the first five years when it comes online."

A Mineral Resources spokesman welcomed "indications from the state government that it will consult with industry" over a “long-term” solution for the gas market.

The spokesman said a bigger plant would create 350 jobs during construction and would help to meet the state's gas needs from 2030.

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He also suggested the company was "willing to negotiate" on a provision that would allow the state government to "call in" extra gas if needed.

WA Premier Roger Cook says he's open to changes to the onshore gas ban provided producers can demonstrate why it's needed.

Mr Cook stressed that WA's gas reserves belong to the public through the states but says he also understands the commercial challenges gas producers face.

"I think we need to be realistic," Mr Cook says.

"If we are looking at a scenario where we have 100 per cent of zero supply of gas then that's not a great scenario for us either.

"So we need to be actually understanding what their commercial obstacles are and assist them to overcome those, if there's a legitimate argument to be made that that will assist to bring their gas reserves online."

Government 'all over the place'

Steve Thomas is WA's shadow energy minister and he's urging the government to tread carefully.

He's also critical of the way the government has been handling the matter, accusing it of being "all over the place".

Steve Thomas says the government's position on the issue is "all over the place".(ABC News: James Carmody)

"I think there's a solution that may allow some export of onshore gas when the marketplace can absorb that," Dr Thomas says.

"The issue is that you don't want open slather.

"It is critically important that we support the domestic gas users – those industries that are employing West Australians."

For Mr Lukey from Coogee Chemicals, the government should be strengthening rather than looking to weaken its domestic gas reservation policy.

He says the policy is already so full of loopholes that some producers are providing just a fraction of their obligations.

Coogee Chemicals founder Gordon Martin, chairman Tim Martin and Grant Lukey.(ABC News: Daniel Mercer)

Amid plans for WA to exit coal – a plan assuming an increase in gas power – and hopes of a green mineral processing boom that would need big amounts of gas, he says the government is about to make a big mistake.

"I think Western Australia is at a crossroads," Mr Lukey says.

"Our concern (is) any contemplation or any thought of changing the [domestic gas] policy here for onshore gas will likely result in what we experienced on the east coast.

"And that's a disaster."

Mark McGowan now on MINRES payroll. Lol