Western Australia faces 'growing shortfall' of increasingly expensive gas: EnergyQuest

Western Australia is heading toward a gas supply crunch, with prices more than doubling since 2019 and further tightening looming as two coal-fired power stations close by 2029, according to new analysis from energy consultancy EnergyQuest.

Additional supply, such as Woodside's Browse, will only temper the price increases, according to gas industry consultancy EnergyQuest.

EnergyQuest head of consulting Matt Paull said Western Australia's major gas users - including mining companies and power generators - face limited alternatives to gas for at least the next decade, but supply will begin to decline in a few years.

"So you have a growing potential shortfall," he told Boiling Cold.

The outlook is the reverse of then WA premier Mark McGowan touting an "abundant supply of cheap gas" to lure eastern states industry westwards in 2019.

Any investor who accepted McGowan's sales pitch would now feel misled - the price has more than doubled since then, according to WA's Department of Mines, Petroleum and Exploration.

Paull, speaking after the release of EnergyQuest's third annual outlook for the WA gas market to 2050, said the wholesale price of gas into the Dampier to Perth Natural Gas Pipeline has been heading upwards since 2020.

However, since a state parliamentary inquiry heard complaints from users in 2023, the market has been more balanced.

Paull said that Woodside's promise to supply an additional 50 terajoules a day in 2024 and 2025, and Alcoa closing its Kwinana alumina refinery in 2024, helped.

However, there is more trouble ahead.

"The market is going to get tighter," Paull said.

"You're looking at a likelihood of shortfalls and fewer supply options at a higher cost to develop, that's putting pressure on gas prices."

Coal and diesel phase-out to drive up gas demand

Despite the gloomy outlook for gas buyers, Paull expects gas demand to grow for several reasons.

The WA government has committed to closing the two coal-fired power stations in Collie owned by its energy utility Synergy by 2029.

There are doubts about whether the privately owned Bluewaters coal-fired power station will continue beyond then. Coal from Collie is becoming increasingly difficult to extract, driving up the price required for the town's two coal mines to remain viable.

Paull said renewable energy was not being built fast enough to replace coal generation, and either coal-fired power would have to run for longer or the South West would need more gas generation, further pushing up demand for gas.

Advocates for renewable energy and more rapid emission reductions worry that a temporary need for more gas generation could embed a greater amount of fossil fuel in the system for decades.

While replacing coal may need more gas in the south of WA, Paull thinks the big iron ore miners switching from diesel to battery-powered vehicles will have the same effect in the north. The renewable energy used to charge the batteries likely needs to be supplemented by gas.

Alumina is the biggest gas user

Alcoa's two remaining alumina refineries in Pinjarra and Wagerup make it the biggest gas customer in WA.

South32's Worsley refinery is now adding to gas demand after converting two of its five boilers from coal to gas. Paull said in some months, Worsely now consumes more gas than any other facility in WA.

Both Alcoa and South32 are pursuing new technologies to allow the processing of bauxite into aluminium to be electrified, but development is in its early stages.

Paull sees a scenario where WA's miners, mineral processors and the South West power grid all need more gas at the same time.
"That may be a difficult equation for WA to balance," Paull said.

South32 seems to be keeping its options open, with timing for converting the three other boilers to gas dependent on "considerations around domestic coal and gas supply," according to its 2024 sustainability report.

Limited new supply won't meet growing demand

The WA gas market is dominated by a small number of large producers and users, and actions from just a few players can swing the market between balance and shortage.

Over the past half-decade, supply from the North West Shelf has diminished since the project fulfilled its original obligation to supply gas to WA, and Santos' Devil Creek processing plant has delivered no gas in 2025 after the Reindeer field was depleted.

That has been countered by increased output from Chevron's Gorgon.

Woodside plans to start its Scarborough field in late 2026, which will eventually supply a significant 225 terajoules a day of gas to WA through its Pluto plant. However, more than half will go to the adjacent Perdaman urea plant under construction.

Paull said the Perth Basin in the Mid West had the potential to supply more than 20 per cent of the market after 2030 when the WA Government's ban on exporting onshore gas becomes fully effective. However, a lot depended on successful exploration drilling, which has not been the case recently.

From about 2036, the Chevron-led Gorgon project that supplies about 25 per cent of the WA market will no longer be obliged to supply the local market as its fixed volume domestic gas supply obligation would have been met. Paull said he would not necessarily assume Gorgon would then cease serving the market.

If Woodside develops the Browse field, its domestic gas reservation obligation would force some of that gas to the local market, giving supply a significant boost. However, EnergyQuest does not include the project in its base case.

Large new supplies could help dampen price rises, but cannot support a return to low gas prices. Paull said the more cost-efficient fields have logically been developed first, and those that may follow, like Browse, will be more expensive.

Woodside's Pluto project garnered attention during the 2023 parliamentary inquiry into WA's domestic gas policy, as it has delivered only a sliver of the 15 per cent of gas exports to the local market expected. Time may be running out for the project to catch up. Paull said production from the field is expected to decline in the not-too-distant future.

Tough times ahead for WA's fuel of choice

Since Sir Charles Court enabled the North West Shelf project in his decade as WA premier to 1982, many of his successors have at times been fixated on repeating the act, ushering in more gas export projects with obligations of varying success to supply the local market.

Generations of politicians, bureaucrats, lobbyists and journalists in Perth have come to believe that gas and economic growth are synonymous west of the Nullarbor.

Paull makes the point that gas prices in WA are still low compared to the rest of the world and the East Coast, whilst significantly higher than they have been in past.

His advice to potential investors in gas-consuming projects in WA is that EnergyQuest expects supply to fall short of demand and that the gap will widen with time.

"And they'd want to be listening to what the government is saying and doing," Paull added.

"The future of the WA gas market looks quite different to the last few decades."

As Western Australia transitions towards renewable energy, it faces a challenging period where gas demand may peak just as supply becomes scarcer and more expensive. For a state that built its industrial advantage on cheap energy, this is a fundamental shift in WA's economic landscape.