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Highlights
- The WA government modifies its Domestic Gas Policy, allowing onshore gas exports to stimulate market development.
- Companies like Beach Energy, Strike Energy, and Triangle Energy stand to benefit from the new regulations.
- The policy change aims to ensure a more robust supply of gas for domestic use while attracting investment in the sector.
The Domestic Gas Policy has been an integral part of Western Australia’s energy landscape since 1979, initially established to support the North West Shelf liquefied natural gas project. Officially formalized in 2006, this policy aims to secure the state’s long-term energy needs by mandating that 15% of the gas produced offshore is reserved for domestic consumption. This policy had previously contributed to lower gas prices in WA compared to the eastern states.
In 2020, the policy was further tightened by implementing a ban on onshore gas exports. However, recent developments have led the WA State Government to revise this approach. The Cook Labor Government has lifted the ban, allowing onshore gas producers to export up to 20% of their total production until the end of 2030. After this period, all onshore gas production must be designated for domestic use. This change aims to stimulate development while balancing the gas market in WA.
The Australian Energy Market Operator (AEMO) has forecasted a potential gas deficit in WA between 2024 and 2029, driven by challenges in finding and developing new offshore gas fields and declining production from aging ones. This shift in supply dynamics has led to an increase in spot gas prices, highlighting the urgency for policy adjustments.
Impact of Changes on Gas Supply
At first glance, allowing 20% of total production from onshore gas fields might seem counterintuitive, as it appears to reduce the gas available for domestic use. However, by enabling onshore gas operators to access higher prices through export markets, the development of these fields becomes more economically attractive. This shift could lead to increased production and ultimately more gas available for the domestic market.
The revisions in the Domestic Gas Policy are expected to stimulate exploration, especially in the currently active Perth Basin. Although the 2030 deadline limits the ability to capitalize on these changes fully, companies may still find significant opportunities.
Company Responses to the Policy Change
Strike Energy (ASX:STX) has publicly supported the policy change, highlighting that it enhances the investment climate for gas projects in WA. In an announcement on September 19, the company noted that access to export markets allows for premium pricing and a deeper market. With substantial uncontracted gas reserves across its pre-final investment decision projects, Strike Energy is poised to explore further opportunities.
Another company that stands to gain is Triangle Energy (ASX:TEG), which encountered a setback in August when its Booth-1 exploration well in the North Perth Basin was plugged and abandoned. However, the company remains optimistic about the potential of its L7 permit and is considering drilling additional wells, supported by the new policy changes.
Buru Energy (ASX:BRU) is also shifting focus towards its Rafael conventional gas and condensate discovery in the Canning Basin. This project benefits from a unique exception allowing the first project to export all but 15% of its gas. Buru's strategy involves using a mini-LNG plant to monetize its contingent resources, enabling it to transport LNG without relying on extensive pipeline infrastructure.
At the larger market level, Mineral Resources (ASX:MIN) has indicated plans regarding its Lockyer discovery, suggesting a partial sale could be explored in light of the policy adjustments.
The changes to Western Australia's Domestic Gas Policy represent a pivotal moment in the state's energy landscape, aiming to balance domestic needs with the demands of a growing export market. By incentivizing onshore gas production and development, WA is taking proactive steps to secure its energy future while attracting investment in the sector.
