WA has a gas reservation policy - why, it is called market failure because our market is too small to take the gas, and multinationals are only interested in exporting it given the size of the local market. That is multinationals will never supply into the Australian economy without a stick approach (hence the embarrassment that China pays less for gas than us overeast noting production of raw gas fed into a gas pipeline should be a lot lot lot lot (get the drift) cheaper than freezing it into LNG, shipping it and then regassifying it at end destination.
The State Governments and Federal Governments should be embarrassed with itself (and WA congratulated for forcing multinationals to supply into the local market orelse no approvals and yes they whinged and whined like spoilt brats those multinationals saying they wouldn't invest but yet Gorgon/Wheatstone/Pluto all got up in WA and I wonder why - well because multinational gas producers stretch the truth, pretty simple) given the resources are owned by the Australian people and the Australian people should benefit before China and the likes. A total and utter policy failure Federally and over east (with the exception on WA who told the fools overeast yonks ago the stick approach was the only thing going to work and the Feds and the other laisser faire economic dropkicks (like teh ACCC) have finally cottoned on to the term market failure). Here is the change of heart from the ACCC LOL -
disallowed/business/the-economy/sense-of-contempt-accc-boss-slams-gas-suppliers-20190305-p511s8.html By way of background here are two posts I posted on the subject back in 2017in italics and in full - Post #:
24286068 and Post #:
24289818Victoria though is a special place of utter dropkicks - banning onshore exploration the fools and not understanding that gas can be a transition fuel to their beloved carbon free economy. But I just see Victoria's stance on gas, while rabbiting on about cheaper electricity prices and moving towards renewables - as typical NIMBY approach.
Australian politics has become the land of the stupid.
All IMO and my posts from two years ago.
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I think most say a deal is a deal but don't really understand that Australia has enough gas to serve both the domestic and export market but the fact is multinationals don't care about supply into the domestic market. The domestic market is just way too small for them to be interested but too important for Australia not to reserve gas for the domestic economy. If it is true, MT is really doing what the US is doing now - local supply before exports but to repeat we do have enough gas for both. If MT goes ahead with this policy I will give him kudos for a change - note WA has a reservation policy already btw.
In terms of domestic gas demand, primarily we have 'market failure' and then 'agreement failure' with LNG companies by governments not understanding 'market failure'. As I said WA has a gas reservation policy that then goes into any formal agreements with LNG producers so LNG producers know they have to supply domgas in addition to LNG facilities before the FID decision (as WA understands 'market failure'). The debate will now move to soverign risk - meaning a domestic requirement after agreements made - and multinationals hide under this as the public and government often don't understand these numbers in this debate.
I think before we start maybe go to page 34 of this link and have a look at the map orelse when we next debate this no one really understands much on this forum at all on gas shortage issues and multinationals having no interest in supply the domestic market - market failure issue. I have seen this map since this publication as well in other publications.
http://www.dmp.wa.gov.au/Documents/About-Us-Careers/AboutUs-StatisticsDigest_2009-10.pdf
Many would be saying what the hell is Scarpa blabbering on about and God protect the free market = well
1 TcF of gas equates to 20 million tonnes of LNG, and currently our export capacity with all current LNG projects coming onboard is roughly 50 million tonnes of LNG per annum (or roughly 2.5 TcF of gas per year). Australia's current gas reserves are stated to be 300 TcF (note the map I linked is old and shows reserves of about 200 TcF). Most leases (yes you only get a lease btw not permanent lease are 20 years - 50 years to an LNG producer). Even assuming a 50 year lease, well our 50 mtpa LNG operations will only use 125 TcF of gas leaving hey, even on the old figures, 75 TcF of gas in the ground or 175 TcF of gas under new figures before we find more under new exploration (hence the argument Australia will be the new LNG powerhouse but we still need to ensure gas in domestic market).
In other words there is already gas available for domestic market but multinationals are not interested because they want to grow facilities to export offshore - the reason is the domestic market is small and overseas boards are not interested with a pissant supply deal in the domestic market when more gas and money can be exported by LNG (hence why WA has a reservation policy multinationals have to supply and they know that before entering any deals with WA). Take the Gorgon project, it is a 15 million tonne per annum LNG project and its gas exports are equivalent to 2 1/2 times total gas demand in WA - so Gorgon argues well that market is been supplied by Woodside/Apache right now so not much for us to supply, but State said, well we are reserving that and you know that because if we run out of gas there you will supply under our agreement and it won't affect your LNG operations and you still have way too much gas in the field so don't argue or go somewhere else (Gorgon and now same for Wheatstone they said ok we hear you even though unhappy because we don't give a toss for your electricity generators and Alcoa but a deal is a deal).
So hence the need for a domestic gas policy in WA (and probably Australia) because the domestic market is small (yes small so multinationals are not interested in a few bucks in the domestic market however it is important) when the rewards are bigger by exports, but the National interest says some gas must go into the domestic market to protect local industry and power generation. WA understands that - the east coast doesn't and btw even if multinationals supplied gas into the domestic market on the east coast it wouldn't affect the gas they could export in terms of LNG - there is lots of gas just an unwillingness to understand 'market failure' and ensure multinationals supply gas into the domestic market overeast and it wouldn't affect operations as can supply full LNG and gas in market (and have cost recovery - just a desire they don't want too and that is the problem). Repeat, enough gas for both LNG and domestic gas but multinationals are not interested - that is the market failure argument. How addressed is the argument, and this we had a deal just avoids the knowledge they have enough gas for LNG and don't want to supply domestically (even if paid cost recovery plus profit) because they don't want to.
So lots of gas, and noting exploration even more gas, that should be able to supply LNG and thus achieve Australia's dream of the world's largest LNG producer whilst still supplying gas into domestic market using pipeline system to give energy security (and obviously the supplier be rewarded on their costs plus profit, but the domestic market is only a fraction of the LNg market as previously posted).
Let's see if MT backtracks on this when the pressure torch is put by the multinationals. He is basically using the export powers (as they used in Fraser Island) to get what he wants. Ironically 10 years ago when WA put in place its reservation policy everyone thought they were idiots - anyway does it stifle investment - well Wheatstone and Gorgon FID happened after that decision, and WA is currently awaiting the Browse decision, Pluto expansion (both likely to go ahead) as well as possible development of Scarbarough taking Australia to world leader in LNG exports - why have I said this (obviously the WA reservation policy hasn't impacted LNG developments of the WA coast but noted at least the goal posts were already set."
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It is based on a market price concept, but if the market price is too high (i.e. domestic demand greater than supply causing domestic prices to be higher than say LNG prices which actually did happen here before the reservation policy was adopted) the government can ask those LNG producers not supplying gas into the domestic market (or not meeting their 15%) to supply some gas as long as it is not above the 15%. That is you will be asked to supply where there is a market and you can recover your costs of supply plus profit.
So you know, Gorgon doesn't currently supply the full 15% into the market because if they did it would increase gas supply here by 1/3rd and currently that is a lot for the WA market to absorb without crashing the price and not meeting commercial considerations of the others, i.e. also similar problem when Wheatstone comes onstream. That is why the feds were looking at this East West pipeline, because our policy has freed up a lot of gas for the domestic market whilst not impacting LNG exports since there is gas availability for both LNG and domgas markets (and the LNG facilities can't sell any more LNG because they are at full capacity for their economic life without expansion and even with expansion still enough gas).
Another way to look at it is NWS is running out of gas after virtually 40 years of domgas supply and (and 30 y years of LNG supply) but with it intending to connect a pipeline to Browse and other newly discovered gas reserves to keep all facilities open there are expected hiccups in supply in the short term. This project supplies 50% of WA's domgas needs plus exports 19 million tonnes of LNG per year. With Pluto, Varunus island and Macedon (the two latter are just small gas fields) supplying the rest. What will happen in the switch in the NWS to when get the Browse gas into the LNG facilities keeping LNG production going there for another 40 years is they may need to call on Gorgon/Wheatsone for supply to the 15% target so that the domestic economy can continue to operate its power stations and industry like Alcoa getting its gas for alumina production. Obviously if downstream processing of our mineral resources become viable and energy is a large input costs industry can get its gas.
To be clear the operator will always get a price equal to at least its costs of production plus profit component plus a little more. If the WA economy significantly expands then they may call on those to supply up to the reservation. If Woodside finds new gas fields to supply NWS and doesn't need Browse, for example, and noting noises around Scarbarough) we would have so much gas reserved here in WA without a domestic market that makes the East West option viable but the pipeline tariff on that pipleine will be quite high IMO given distance so best East finds its solutions on the east coast.
If we find small gas fields here like Macedon for example or Reindeer here that can only supply domestic market (i.e. that was our problem here we ran out of small fields supply and needed supply from LNG project to avoid a long term shortage which would have closed our gas power stations, given 50% of out electricity comes from gas, and industries such as Alcoa which need gas in producing alumina because the infrastructure built was gas beased) then the govt might not need to call on the gas from the LNG projects. In terms of capex, just be mindful apart from a small investment in a domgas facility the pipes are already there (Damier to Bunbury and companies own pipe to LNG facility) so reservation just means that - can be called upon.
Hope that helps. 
