WA gas shortage looms as ‘tricky’ companies game state gas policy

Western Australia faces an “imminent and potentially severe” gas supply shortfall that threatens jobs and economic growth, a parliamentary inquiry warns.

The state’s much-lauded policy of making gas exporters reserve 15 per cent for the local market was “no longer fit-for-purpose”, according to the lower house committee’s interim report on the arrangement, tabled on Thursday.

“This shortfall is likely to threaten thousands of WA jobs, jeopardise billions of dollars’ worth of economic activity and derail the state’s decarbonisation agenda,” the committee said in a statement.

WA will be short of gas until 2028, then after just a year of surplus enters a period of increasing deficit, according to the Australian Energy Market Operator’s gas outlook, released in December.

WA’s domestic gas policy relied on gas exporters adhering to the principles and spirit of the arrangement, the committee said, but the companies varied considerably in how much they sold compared to their shipments overseas.

Committee chair, Labor backbencher Peter Tinley, told WA parliament some companies were “being a little bit too tricky” in their interpretation of their obligations.

“If you’re an organisation that’s set up for profit, you will pursue profit,” he said.

Committee member and Labor backbencher David Scaife said he expected companies to honour their commitments.

“Some are doing so by relying on the ambiguous language used to enshrine the policy in the various piecemeal agreements,” he said.

“Some are doing so by relying on the limited enforcement options available to the state, and some are doing so simply because the profits to be made from LNG exports justify the risk of suffering the costs of non-compliance.”

The turnaround in sentiment about the effectiveness of the policy is dramatic.

Just five years ago, then-WA premier Mark McGowan spruiked a different future: “My pitch to east coast industry is simple, if you want a cheaper and more reliable supply of gas – go west.”

Now, the state faces a future of more expensive gas that could shut marginal operations and will deter new investment.

Tinley noted that in 2006, when the Carpenter Labor government introduced a policy that gas equivalent to 15 per cent of exports be reserved for local use, the industry was strongly opposed. But now it supported the policy – as long as there are no changes.

“The sky was going to fall in, literally … it was an ‘armageddon’ event for industry,” he said of the reaction at the time.

Scaife said companies rasing the spectre of sovereign risks could not be used as a get-out-of-jail-free card to avoid appropriate responses to changed circumstances.

Tinley said government could legislate to fix the problem, but it would be easier if the industry acted.

The interim report contains no recommendations. The committee plans to table its final report in May.

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