Woodside in no hurry to supply Pluto gas to WA

This story was originally published in The West Australian on 23 January 2017 with the headline "WA unlikely to get Woodside’s Pluto gas." © Peter Milne.

Woodside is confident it will not have to pipe gas to WA from its giant Pluto project despite the company’s five-year reprieve from the State’s domestic gas policy ending in May.

However, the absence of Pluto gas from the market may figure in a looming pre-election debate on domestic gas policy.

The reservation policy requires LNG producers to quarantine gas for domestic use equal to 15 per cent of the LNG they export.

The policy, which was conceived by the Carpenter Labor government, is intended to stop energy companies exclusively targeting the lucrative export market and isolates the local price of gas from international fluctuations.

LNG producers are required to sell the reserved gas only when it is commercially viable, which critics of the policy say is a fatal flaw.

Pluto’s domestic gas obligations start in May, five years after first LNG production, but it appears that gas from the field off the North West coast will not be powering WA industry or households anytime soon.

“Based on our recent experience in the market, however, there is currently no shortfall in supply and the market is well supplied on commercial terms,” Woodside told WestBusiness.

A spokesman for State Development Minister Bill Marmion said the State talked regularly to Woodside about Pluto’s domestic gas commitments. The Government was not considering any changes to the policy.

WA Nationals leader Brendon Grylls said he was not confident the policy was right and he was concerned the targeted reservation of gas would not be achieved.

“The supply of domestic gas to WA businesses at an affordable price is a key economic enabler for the post-mining boom economy,” he said.

“We should look beyond putting all of our resources on boats and utilise them effectively and locally to add value and jobs.”

A spokesman for Woodside said it believed the WA pipeline gas market was well supplied but was considering selling LNG in the Pilbara to displace diesel as a transport fuel.

The Pilbara was the perfect place to lead the change to LNG as a transport fuel, with LNG plants close to fuel-intensive mining and shipping operations, Woodside chief executive Peter Coleman said last year.

One potential customer, Fortescue Metals Group boss Nev Power, urged Australia to develop its natural gas immediately to increase the competitiveness of industries.

Main image: Pluto LNG plant. Source: Woodside Energy Limited