The recent announcement by WA’s Premier to tighten WA Domestic...

The recent announcement by WA’s Premier to tighten WA Domestic Gas Policy is another example of politicians developing policy by stealth without fully understanding the implications of such policy. The essence of these changes are to secure WA’s natural gas resources for the benefit of West Australians which on the surface has merit and was the express intention of the 15% reservation policy implemented way back in the days of Sir Charles Court. Western Australian’s do have reason to be concerned with the situation that has occurred in the Eastern States where again flawed political decisions have starved the domestic market of gas.

The Premier has stated “There will be no change to traditional LNG projects like Browse and Scarborough, where they must reserve 15 percent of exported gas volumes for domestic use.” The interesting question is why have other gas projects been penalised “Under the updated policy, local WA gas cannot be exported to the Eastern States or overseas.” The exception around the Waitsia Project is also interesting and the caveat’s are clear - “the State Government has given in-principle support to allow the Waitsia project in the Mid-West to fill available capacity at the Karratha Gas Plant and export some of its gas as LNG for a short period of time.” From my observation this leaves the government with plenty of space to adjust these decisions going forward with respect to Waitsia. It would be helpful however if the government provided more clarification around what the specific parameters are associated with these caveats.

From a more macro perspective, a ban on WA gas being available for non domestic markets seems like an overreaction particularly in light of the 15% reservation policy being successful to date. Why put in jeopardy future gas development investments with such punitive legislation whilst allowing existing gas businesses to operate on more favourable terms. Not being a lawyer I am unable to comment on the legality of these changes from a Trade Practices, Fair Trading etc perspective but the inconsistency should be of concern to all West / Australians.

It is of comfort that the gas in the ground is not going away and governments come and go. Strike Oil does have time on it’s side and the Board and Management have been clear about where they would like to take this company. Strike Oil does have a high calibre team which I am sure is the envy of our competitors - there may be some share price weakness in the short term but the fundamentals of this company are rock solid. As is always the case from my experience, patience is the most important attribute in building shareholder value and having been a shareholder in Strike for a long time my belief is still strong.

Just my thoughts on the current developments!