Woodside doubling its WA gas price in 5 years evidence of a tight market

Local industy in Australia's largest gas-exporting state is concerned gas producers are prioritising exports at their expense.

Woodside doubling its WA gas price in 5 years evidence of a tight market
Woodside's Pluto LNG plant. Woodside

EXCLUSIVE

The two largest Australian oil and gas companies, Woodside and Santos, have been able to charge significantly more for the vital fuel in recent years, demonstrating a market shift that has heavy industry worried.

Woodside, which supplies 19 per cent of the WA market, charges twice as much for the vital fuel as it did five years ago.

Santos, which had a 24 percent market share in the 12 months to June 2024, charges more than Woodside and has increased its price by 83 percent in four years.

There is no reason to believe the prices received by WA's second and third biggest suppliers are outliers from their competitors. Chevron, the largest seller with a 26 per cent market share, does not publish its average price.

For Woodside, most of the jump has occurred in the past three years, with the average price it fetched for its share of gas from the North West Shelf, Pluto, Macedon and Wheatstone projects rising from $3.70 to $6.50 a gigajoule.

Santos sells gas from the Macedon, Varanus Island and Devil Creek processing plants.

With most gas sold in WA under long-term contracts, the average price is likely to be a lagging indicator in a rising market, with most new gas contracts most likely signed for considerably more.

Just six years ago, then premier Mark McGowan touted WA's "abundant supply of cheap gas" to lure industry in the eastern states westwards.

Since then, that promised abundance in Australia's most gas-dependent state has turned into a likely shortage. In December, the Australian Energy Market Operator predicted a tight market this decade and a significant shortage in the 2030s.

Potential investors need confidence that gas will be both available and affordable for a decade or more to justify projects with long payback periods.

The AEMO forecast to 2034 misses further bad news for gas buyers.

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.

The Gorgon deal that could up the stakes on WA’s looming gas shortage
Western Australia’s biggest gas plant may be able to export for 30 years with no obligation to supply the state, thanks to an agreement struck two decades ago.

Heavy industry wants policy enforced

Richard Harris, spokesman for the Domgas Alliance of large WA gas users, said it typically refrained from commenting on gas prices from individual producers.

"However, it is important to highlight that the WA domestic gas policy was established to ensure an adequate supply of gas to meet WA's domestic consumer needs at a cost advantage compared to international LNG markets," he said.

Harris said there was genuine concern within the industry that some LNG producers may be prioritising the more profitable export market over fulfilling their domestic gas obligations.

"This could restrict supply for local WA industries and drive up prices for local consumers," he said.

The future of investments by Domgas Alliance members - that include WA's biggest gas consumer Alcoa, Wesfarmers Chemicals and Yara Pilbara Fertilisers - or other large gas users could be threatened if gas prices continue to rise.

Some large gas users will consider curtailing or ceasing their operations in WA if the gas price hits $7.93/GJ - 22 per cent higher than Woodside's average price in 2024 - according to AEMO's 2024 WA Gas Statement of Opportunities

From AEMO's survey of industry, the median price that would cause curtailment or shutdown was $10.75/GJ.

Over the past two years, gas contracts above $10/GJ have been agreed in WA, according to a number of industry participants not authorised to speak to the media.

Woodside did not answer questions about what factors led to the spike in its WA gas price.

The WA gas market is tight in part because Woodside's Pluto LNG has delivered just a fraction of the nominal 15 per cent of gas exports headlined in the state's much-touted domestic gas policy, courtesy of an unenforceable deal made in 2003.

WA’s looming domestic gas shortage: How a ‘good faith’ argument left WA short
A shortfall in gas from exporters could shut WA businesses and deter new investment and Woodside’s Pluto project is the biggest problem.

A Woodside spokesman said it was in ongoing discussions with the WA Government about how it could support the state’s energy needs from all its assets, including Pluto.

"Through these discussions, Woodside agreed to make up to an additional 50 terajoules a day of domestic gas available in WA in both 2024 and 2025 to meet the forecast market shortfall," he said.

"We have always said we are willing to play our part,

"Flexibility in the WA Domgas Policy enables producers to adjust their supply in response to market conditions. This is exactly what Woodside is doing."

Woodside plans to begin production from its Scarbrough gas field in 2026 through an expanded Pluto gas plant.

Up to 225 terajoules a day of gas will flow to the WA market, although more than half will be consumed by the under-construction Perdaman urea plant.

Since 2021, the output from Santos' Devil Creek plant has declined significantly due to the natural decline of the Reindeer offshore field.


The data

Woodside annual reports gave the average realised price for pipeline gas sold that year in $US/barrel of oil equivalent from 2015 to 2019. For 2020 and 2021, the price was in the presentation released with the annual results.

These were converted to $A/gigajoule using Woodside's 0.1636 boe per terajoule conversion factor and ATO average annual exchange rates

2015 - 22 $US/boe - $4.58/GJ
2016 - 21 $US/boe - $4.84/GJ
2017 - 20 $US/boe - $4.08/GJ
2018 - 15 $US/boe - $3.13/GJ
2019 - 14 $US/boe - $3.14/GJ
2020 - 14 $US/boe - $3.32/GJ
2021 - 17 $US/boe - $3.70/GJ

In 2022, Woodside supplied an average price that included Bass Strait sales from the newly acquired BHP assets, so no WA data is available. In the graph 2022 is represented as the mean value of 2021 and 2023.

In 2023 and 2024, Woodside supplied the average realised price for pipeline gas in WA in $A/GJ with its quarterly results. The average of the four quarters was used.

2023 - $6.48/GJ
2024 - $6.50/GJ

Santos prices were sourced from its 2024 fourth-quarter report data tables, and the $US converted to $A with ATO exchange rates. Prices before 2020 were not available.

2020 - 3.37 $US/GJ - provided - $4.48/GJ
2021 - 4.48 $US/GJ - provided - $5.96/GJ
2022 - 4.15 $US/GJ - provided - $5.97/GJ
2023 - 4.95 $US/GJ - provided - $7.45/GJ
2024 - 5.41 $US/GJ - average of quarterly prices - $8.19/GJ


Corrections and updates

30 January 2025 - The original story omitted that Santos also makes its WA gas prices public. Graph and text have been updated to reflect that.

3 February 2025 - Santos provided WA gas prices in $US/GJ and this was incorectly presented as $A/GJ. Story text has been significantly amended to cover Santos.

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