Western Australia is one of the most energy-rich locations in the world. In addition to our abundant renewable energy resources, we are also home to some of the world’s biggest offshore natural gas reserves.
Natural gas is both a source of energy for Australia and an essential raw material for manufacturing. Manufacturing in Australia is a $100 billion industry directly employing 890,000 people, and almost one-third of the gas consumed in Australia is used by manufacturers.
The availability of natural gas here made the Western Australian economy more dependent on natural gas supplies than any other state. We lead the nation in the use of natural gas to generate electricity for businesses and households, as well as powering downstream processing and manufacturing.
Successive governments have negotiated in an ad hoc way with offshore LNG project proponents to secure domestic gas supplies to Western Australia. This started with the negotiation of supplies from the North West Shelf, which have underpinned the domestic Western Australian domestic gas market ever since.
But in 2006, the price of natural gas in WA’s domestic market commenced a three-year period of significant increases. This was driven by strong growth in domestic demand for gas and the rising international LNG spot price.
Since 2009, the price of gas delivered to Perth for large industrial customers has fallen from about $16/GJ to about $10/GJ in 2015. However, in real terms, this is still significantly above the price of about $5/GJ (in 2015 dollars) delivered to large industrial customers before the price increases that commenced in 2006.
We’re already seeing the impact the domestic gas supply is having in other states, with manufacturing businesses in Victoria at serious risk of closing if they’re unable to secure deals for the supply of natural gas. Despite an abundance of the resource here, there is less gas available in the domestic market today.
It’s vital for our economy that we have a plan in place to deliver a long-term energy source to Western Australian households and businesses, at a price that would underpin the competitiveness of secondary industries like manufacturing and downstream processing.
We need a State Government willing to review the effectiveness of the existing domestic gas reservation policies and prioritise improving the current system to ensure it can deliver continuous supplies of natural gas to industry, at prices that drive competitiveness and job creation for WA businesses.