Western Australian natural gas

Energy Policy 1994 22 (4) 309-316

Western Australian natural gas

Frank Harman

Western A ustrafia has 80% of A ustralia's natural gas resources. These resources are currently ex- ploited to supply the Western Australian market and L N G to Japan. Growth in the market in Western Australia is dependent on limited prospects for power generation and mineral resource processing. Future exploitation of gas resources will require new export L N G markets and~or the installation of a transcontinental pipeline to eastern Australia. The transcontinental option should only be considered after other options for energy supply in eastern Australia are eliminated. Competition to meet market growth in North-east Asia will be considerable and Austra- lia lacks the policies to underpin future L N G capacity.

Keywords: Gas resources; LNG; Transcontinental pipeline

Since the discovery of natural gas off the Western Australian coastline in 1971, there has been a sus- tained political and economic debate over the use of that gas. 1 Further discoveries in the Carnarvon basin and other Western Australian off-shore sedimentary basins now mean that Western Australia possesses 80% of Australia's known natural gas resources. Currently, the state government of Western Austra- lia is considering the options for the use of the gas. Following the recommendations of the Industry Commission 2 the Australian federal government in Canberra is also considering options in the light of its policy to push for greater efficiency in the electricity and gas supply industries. The federal government has embarked on a process of reducing state government powers over electricity and gas policy in the belief that a national policy framework is required for greater efficiency. Furthermore, the federal government believes that the state governments have shown themselves to be too parochial and inefficient in their policies towards the use of natural gas and the generation of electricity.

Frank Harman with the Economics Department at Mur- doch University, Murdoch, Western Australia 6150, Au- stralia.

From 1984 the populated south-west of Western Australia has been receiving gas from the North West Shelf project. This project is the first to exploit the gas resources of the Carnarvon basin, and it has been undertaken by six joint venture participants: Woodside Petroleum, Shell, BP, BHP, Chevron and Japan Australia LNG. Woodside Petroleum and BHP are Australian public companies and Woodside is the operating company for the North West Shelf Joint Venture Participants (NWSJVP). Japan Au- stralia LNG was created through an association of the Japanese companies Mitsui and Mitsubishi. The domestic phase of the project began in 1980 with the signing of a contract for the supply of gas to the State Energy Commission of Western Australia (SEC- WA) with deliveries to start in 1984. The bulk of the gas is carried to the south-west of the state through a pipeline owned by SECWA. Gas for the domestic phase comes from the North Rankin field by way of a single production platform.

Export contracts for a 20 year supply of LNG were signed in 1985 with eight Japanese electricity and gas utilities, and deliveries began in 1989. Production of LNG has increased in each year since 1989 and is expected to plateau in 1995, with the completion of the third train and debottlenecking, at 7 million tonnes pa. To meet the additional gas demands a second field, Goodwyn, will be in production in 1994 following the installation of a production platform over the field. Both the North Rankin and Goodwyn fields are rich in condensate, providing scope for a dual income stream.

The original domestic supply contract between SECWA and the NWSJVP was, with the benefit of hindsight, badly constructed. In 1979 the state government believed that price was of lesser importance than security of supply as a criterion determining future gas consumption. The contract signed in 1980 resulted in SECWA agreeing to take too much gas at too high a price on a 95% take or pay basis. The consequence is that, a decade after deliveries started, SECWA has accumulated a prepaid inven- tory of gas valued at some A$300 million, the equivalent of six months of contract deliveries.

The state Australian Labor Party (ALP) govern-

0301-4215/94/04 0309-08 © 1994 E}utterworth-Heinemann Ltd 309


Bonaparte Basin 4.9%

% ~- Existing Browse Basin ~ \ ~ - ^ A

28.6% /k \ ~ - --~g ~ \ .... Possible 4 t t

/ ,.-'Y ks ",--. / < , - - ~ . ~ Eromanga ) Amadeus Basin ~ Adavale Basin

-- J' Basin <[ I%-~i~I~ )/--~ <[I~ j~tf~J I <[1% II % zn \

_ . ,<41 ) , l k \ Bowen Bas,o , ( [ Carnarvon Basin"~r~ ~ " . / k [ ~---~----41 ~ ', ~ 49.6% ~ ~ t F'/l¢'~/' '~ ./~. \ , t x I /Cooper,-l~ ,- . . . . . . .

' 4.3% " "

\~L Perth Basin I I,'l ~,,] ~ --~,_~

~'~- ( 1 % ~ t a L ' ~ ' ~ Surat Basin

Qt~vay Basin ~ " ~ 7~7111alld Basin Bass Basin <1%

Figure 1. Location of Australia's natural gas resources. Source: Department of Primary Industries and Energy, A National Energy Policy Paper, Australian Government Publishing Service, Canberra, April 1988.

ment potentially exacerbated the gas surplus prob- lem by supporting, since 1989, a proposal to have a privately owned and operated coal fired power station built to supply electricity into the SECWA transmission system. In moving down this path the government of the day rejected the recommendation in 1990 of the Power Options Review Committee to adopt gas fired combined cycle plant for base load generation)

In August 1993, however, a newly elected Liberal/ National Party coalition state government decided to turn its back on the 600 MW private power station supported by the previous government, and instead to make a commitment to only a 300 MW coal fired power station built and owned by SECWA. By making this change the new government hopes that the situation for the gas industry will be more encouraging and also provide a basis for the renego- tiation of the North West Shelf gas supply contract.

The economic development strategy of successive Western Australian governments has been to influ- ence the mining and energy sectors of the economy (in particular iron ore, bauxite, nickel, gold and mineral sands) to undertake further processing of mineral ores rather than have them exported in raw or relatively raw stages. One obstacle to the value adding development policy has been energy prices. Electricity from coal fired power stations is expensive because of a combination of high cost Western

Australian coal and small-scale generation. Natural gas has been expensive because of the original decision in 1979 to have natural gas based on alternative fuel prices, particularly oil prices. Energy costs, among other factors, have meant that the development ambitions of the state government have yet to be realized, with the past 20 years liberally littered with failed proposals for steel mills and aluminium smelters.

Natural gas resources in Western Austral ia

Figure 1 shows the sedimentary basins of Australia in which gas resources have been discovered, together with estimates of their relative importance. The Carnarvon, Browse and Bonaparte basins off the coast of Western Australia contain over 80% of Australia's natural gas resources. Figure 2 shows the existing and possible future gas transmission pipelines.

Gas resources in Western Australia are set out in Table 1, along with estimates for oil and condensate. Despite the substantial gas discoveries, the exploration target has always been oil, not gas or condensate. The discovery of gas rather than oil has become a cause for sorrow rather than joy in Western Australia because of the limited possibilities that exist for marketing the gas in Western Australia. The gas resources are not generally associated with

310 ENERGY POLICY April 1994

Scott Reef Petrel Tern Brecknock ~

Dampier ,~.Derby ]

North Rankin~ j "'~:::: Harriet~ ~ . . . . . . ~',.. . . . . . :-~/111~2 _- Po r t Hedland"

Dongara ~I~\ •

Bun bury ~,..~/~ ~ -


Darwin ---.-a /h~ ~ Existing

-~"'~ ~ g S %0C k ha mpton Palm ~ ~il~G lad stone

--Valley ' . BLB~eFa_ 7__ ~ I

i ' " M : : m b a ~ Brisbane

"Pete:b~ 126u9 h Newcastle W h y ~ : ~ L L a ide. ~ J~sNdney

- £ ,~..liD Pen.ola z l~ W0110ngong ~-'~Albu r ~ . . I I Can be r r a

~ H o b a r t

Figure 2. Aus t ra l i a ' s exist ing and possible m a j o r gas t ransmiss ion p i p e l i n e s ?

Names in italics refer to gas fields or gas projects off the Western Australia coast.

Source: Australian Gas Association and Commonwealth Department of Primary Industries and Energy.

crude oil, but they are rich in condensate. Being condensate rich but gas dominant, however, means that the timing of gas production and associated condensate is dependent on gas market conditions. By contrast, the timing of extraction of associated gas, where it exists, is determined by the oil market.

Table 2 identifies the major gas fields within the Bonaparte, Browse and Carnarvon basins. These major fields together account for 92% of total gas resources with associated gas included in the balance. Of these fields only North Rankin is a producing field and Goodwyn is to start production in 1994. The other fields are marked by very limited drilling, long distances to the shore and deep water, as indicated in Table 3. The Carnarvon basin also contains a number of relatively small oil producing fields, with total annual oil production at 3 million barrels in 1992. Associated gas is recovered only

Table 1. Gas, condensate and oil resources in Western Australia as of 30 June 1992. a

Gas Oil Condensate Basin (bcm) (MMbbl) (MMbbl)

Bonaparte 85 - - Browse 477 - 212 Carnarvon 976 456 630 Perth 4 < 1 < 1

Total 1542 456 842

" For developed and undeveloped fields the estimates are based on a 50% probability, while for possible fields the probability is in the 10-50% range. Source: Department of Minerals and Energy, WA.

from the Harriet oilfield, but substantial quantities of associated gas are expected from the Griffin oil project when it becomes operational in 1994, as well as from the Cossack/Wanaea oil/gas project of the NWSJVP that is expected to commence production in 1996, with gas to be delivered through the North Rankin platform.

Limits to the market for natural gas in Western Australia

To date SECWA has been the dominant purchaser of natural gas from producers. SECWA has a con-

Table 2. Major gas fields in Western Australia.

Gas Condensate Basin, Field (bcm) (MMbbl)

Bonaparte Petrel 67 - Tern 18 -

Browse Scott Reef 339 54 Brecknock 138 159

Carnarvon North Rankin 160 106 Goodwyn 107 265 Gorgon (including Spar and

West Tryal) 242 84 Scarborough 350 -

Total 1421 668

as % of totals in Table 1 92 79

Source: Department of Minerals and Energy, WA.

ENERGY POLICY April 1994 311


Table 3. Physical characteristics of major gas fields.

Water depth (m)

Bonaparte Petrel 100 Tern 104

Browse Scott Reef 60 Brecknock 540

Carnarvon North Rankin 125 Goodwyn 130 Gorgon (including

Spar and West Tryal) 250

Scarborough 1000

Distance to shore (km)

250 W of Darwin 315 WSW of Darwin

400 NW of Derby

135 to Dampier 180 to Dampier

200 to Dampier 350 to Dampier

Source: Department of Minerals and Energy, WA.

tract with the NWSJVP for 414 TJ per day, 95% of which is on a take or pay basis. The small onshore Tubridgi field in the Carnarvon basin supplies 20TJ/d to SECWA, and Hadson Energy has a contract to supply up to 60 TJ/d to SECWA over a 10 year period beginning in 1993, with supplies based on the Harriet oilfield and nearby gas fields.

Alcoa, the major bauxite/alumina producer in the state, takes approximately half the gas purchased by SECWA from the NWSJVP to use in its operations. Around 25% of SECWA's gas is used by other industrial and commercial consumers in the south- west of the state, while the balance is used in power generation or prepaid under the take or pay provisions. Direct purchases by consumers of natural gas from producers are limited to small amounts taken by Alcoa from the Tubridgi field and from small Perth basin producers who supply the gas through the Dongara-Perth privately owned gas pipeline (see Figure 2).

In the original NWSJVP gas supply contract 80T J/ d of the 414 TJ/d contract quantity were allocated to the Pilbara region, which is the region encompassing the towns of Dampier and Port Hedland and their hinterland (see Figure 2). The NWSJVP gas treatment plant is located close to Dampier. As well as natural gas, this region is rich in iron ore and currently supplies one half of the Japanese steel industry's ore requirements. The price to SECWA for gas to be used in the Pilbara region reflects the cost of imported oil. The balance of the gas is supplied for the south-west of the state, and priced to SECWA by a formula that takes into account the cost of both oil and coal.

The 80 TJ/d allocation to the Pilbara was premised on the continued operation of two iron ore pelletiz-

ing plants. These closed, however, in the early 1980s, even before gas was available, in response to increases in energy prices and a downturn in the steel industry. The only remaining demands for natural gas in the Pilbara region were for power generation by the iron ore companies. Present demands are for approximately 30 TJ/d for this purpose. In recognition of the oversupply situation the NWSJVP subsequently agreed to reduce the Pilbara allocation to 40 TJ/d, with the other 40 TJ/d becoming south-west gas and priced accordingly. Despite the early promise of large-scale industrialization in the Pilbara region because of the availability of natural gas, the promise has not been realized. Development does not appear possible unless the price of gas can be reduced along with other costs of operating in the region, and improvements are made in access to overseas markets for processed mineral products. This situation was given formal recognition in a report to the state government by the Energy Board of Review. 4

Any reduction in the price of gas in the Pilbara region will depend upon an increase in the number of competitive gas producers. This is happening through the increasing extraction of crude oil with associated gas. A number of new oil fields (Griffin, Wanaea), together with the gas gathering system associated with the Harriet project, will be producing gas in association with crude oil production. Government policy is insisting on minimum flaring of associated gas, and so the potential exists for associated gas to be mobilized to provide natural gas in the Pilbara region for industrial applications. As indicated earlier, the amount of associated gas is relatively small, but it is nevertheless adequate to meet industrial or further power generation needs in the Pilbara. There are signs that demand for gas in the region will expand. A proposal has been made to build a gas pipeline to the major iron ore port of Port Hedland some 200 km east of the existing gas plant at Dampier. The initial purpose of the pipeline is to allow gas to be used to generate electricity. At the moment Port Hedland's electricity comes through a 200 km transmission line from an iron ore producer located close to Dampier. This is expensive power because the gas used to generate electricity is priced at an oil equivalent price. Low cost electricity generation in Port Hedland together with the availability of gas would enhance the potential for mineral processing activities in the area.

The natural gas also contains LPGs, but at the moment the LPG content of North West Shelf gas is combined with the LNG or the gas sold to SECWA. Consideration is now being given to separation, with


the LPGs destined for either export markets or as the basis of a petrochemical plant in the Pilbara itself. The use of natural gas for petrochemical plants in Western Australia has not been found viable to date. The price of gas and the costs of construction and labour in the Pilbara region have been the factors working against any petrochemical industry proposal.

A further possible cause of an expanded demand for gas is the proposal to build a pipeline to the Kalgoorlie gold and nickel mining region of Western Australia. The mining and mineral processing activities carried out there are energy intensive with electricity currently supplied through a 600 km long transmission line from the coal fired generators in the south-west of the state. The generation of electricity in Kalgoorlie and the availability of gas could put the gold and nickel industries on a lower cost basis. The pipeline would also pass by a number of other mines and mineral deposits that would have their viability improved through access to lower cost energy.

In the south west of the state power generation could provide a good growth market for natural gas. Given the recent commitment to a coal fired power station, however, expansion of demand from this source will be limited. No other industrial applications are foreseen which would dramatically lift the levels of gas consumption in the south-west of the state.

Export potential for Western Australian natural gas

The North West Shelf project became operational with LNG contracts of approximately 172 billion cubic metres (bcm) and domestic contracts of 80 bcm, as well as the availability of approximately 305 million barrels of condensate. While the joint production of LNG, domestic gas and condensate makes comparisons with potential projects difficult, the base of 252 bcm may be used as a benchmark for assessing how many other fields could give rise to the same output. Table 2 shows that Scott Reef and Brecknock, Gorgon and Scarborough would meet that requirement. Petrel and Tern fall well short.

The geographical characteristics of these fields highlight the physical difficulties associated with their exploitation. Table 3 sets out the relevant information. The decision to develop North Rankin/ Goodwyn was clearly based on accessibility and lower costs. This is not to say, however, that developments in oil and gas production technology will not overcome these problems. Among the possibili-


Table 4. Estimates of world LNG trade in 1992 (Mt).

1992 Share %

Exporters Abu Dhabi 2.53 4.2 Algeria 14.70 24.5 Australia 4.60 7.7 Brunei 5.28 8.8 Libya 1.16 2.0 Malaysia 7.22 12.1 USA 1.04 1.7 Total 59.90 100

Importers Belgium 3.26 5.4 France 7.10 11.9 Italy - - Japan 39.05 65.2 South Korea 3.40 5.7 Spain 4.10 6.8 Taiwan 1.59 2.7 United Kingdom 1.40 2.3 Total 59.90 100

Source: Department of Commerce and Trade, Government of Western Australia.

ties are conversion to methanol at the well head and greater economies through horizontal drilling. Nevertheless, only the Gorgon field (together with closely associated fields Spar and West Tryal) appear to be suitable for the development of an LNG project at this stage.

Although the natural gas resources identified above are small relative to total world resources, where Russia and the Middle East dominate, they are comparable with those in Malaysia, and somewhat smaller than in Indonesia, both major LNG producers in the Asian region. World trade in LNG is currently dominated by exports from Indonesia to Japan. Table 4 sets out estimates of world LNG trade in 1992. In the European region Algeria is the dominant supplier while in the North-east Asia region Indonesian exports are supplemented by Malaysia, Brunei and Australia, principally for supply to the Japanese market.

The outlook for LNG demand in the North-east Asia region is particularly strong. The Western Australian government has estimated that supply contracts already in place will see a growth in supply to Japan from 39 million tonnes in 1992 to 50 million tonnes by 2000. 5 Similarly, South Korean supply contracts in place should see growth from 3.4 million tonnes in 1992 to 8.7 million tonnes in 2000. Over the same period contract supplies to Taiwan are expected to grow from 1.59 million tonnes to 4.5 million tonnes, with additional supplies coming from Indonesia and Malaysia.

Other growing economies of the Asian region



such as Thailand and Vietnam will have access to pipeline gas from their own region. Southern China, which is also undergoing rapid growth, is currently taking a considerable part of its energy needs from coal. The prospects for increased use of natural gas in China are uncertain at this stage, as is the possible source for any demand that may eventuate. India is also a potentially large user of natural gas, and is conveniently located to draw on Middle East sources. Europe, although served by pipeline gas from a variety of sources, still purchases significant quantities of LNG. Growth in LNG demand in Europe is expected to come from new markets in southern Europe rather than in traditional markets.

By 2010 further growth of demand in South Korea and Taiwan is anticipated to cause a doubling of demand over the contract levels already set for 2000. Japan is expected to have a somewhat lower level of increase. There is therefore scope for new entrants into the LNG market of North-east Asia, as well as expansion possibilities for existing suppliers.

At the same time the number of potential suppliers, as well as the capacity of existing suppliers is expected to grow. In particular the Middle East producers Qatar and Oman are looking to LNG to offset declining crude production, 6 and their ability to enter the natural gas trade is strong through their ability to underwrite LNG developments out of existing crude oil revenues generated by national oil companies. Similar considerations apply to Indone- sia and Malaysia. Indonesia's national oil company, Pertamina, and its Malaysian equivalent, Petronas, may be willing to support new LNG projects in which they hold an interest by taking on risks which a purely private sector venture might not be willing to accept.

Given the preference for natural gas on environ- mental grounds together with the need to maintain reliable gas supplies for those uses where short-term substitution is not possible and long-term substitution is not desirable, consumers may be prepared to pay a premium for the diversification of LNG supplies. This diversification strategy can range from simple support and encouragement for new proposals to the financing of feasibility studies and equity positions for new developments, and it means that all potential sources of supply will be considered.

As adequate reserves exist to support further export scale LNG projects in Western Australia, it is still relevant to assess whether it should only be an LNG project or if there are also advantages in supplying pipeline gas to Western Australian or eastern states' markets. The history of the North West Shelf project is indicative on this question.

Although the original plan envisaged the simul- taneous construction of export LNG and domestic gas treatment plants, delay in concluding the export contract meant that the Western Australian state government signed a gas supply contract for the domestic phase in September 1980. This came on top of generous tax concessions made by the federal government in 1977 that were tailored towards assisting the viability of the project and maintaining Australian equity in the project. The domestic gas contracts enabled an immediate start on the project including common infrastructure for both the export and domestic phases (North Rankin platform, pipeline to the shore and site works) and the specifically domestic aspects of the gas treatment plant. The project was also assisted by SECWA providing the gas pipeline to Perth, as well as by the take or pay provisions of the domestic gas contract.

Thus the domestic gas part of the project provided the basic infrastructure and cash flow that assisted the subsequent LNG export stage. Export contracts were not signed until 1985 and the first LNG ship- ment was in October 1989. It was not only the domestic gas contract that assisted the export stage. The presence of condensate also supplied early cash flow to the project through extraction of gas in excess of market requirements, stripping it of condensate and reinjecting surplus gas.

With the Western Australia domestic market fac- ing a gas surplus it is unlikely that any new LNG project within the next two decades would have the opportunity to supply domestic gas as initial support for an export project. It is also unlikely that government support for an LNG project of the same order as that provided to the North West Shelf project would be forthcoming from either a Western Austra- lian or federal government. The current direction in Australia is to break up the state based, state owned, monopoly energy utilities and introduce greater private sector participation. This more decentralized institutional structure means that there will not be a public enterprise with the resources to provide support. The Australian Labor Party has historically supported public enterprises, and in the 1970s the transcontinental pipeline proposal was a federal Labor government initiative. The present federal Labor government, however, is actively pursuing wide ranging policies of privatization and deregula- tion and market driven policies for the energy sector.

There is therefore little in the way of an institutional framework that could provide government support for any new LNG projects. Barring a change in the political climate this puts Australia at a


disadvantage relative to other potential LNG producers which can rely on substantial government support through the strong participation of publicly owned national oil and gas companies in LNG developments.

Gas supply potential to eastern Australia

The idea of a transcontinental pipeline taking gas from the north-west of Western Australia to the eastern states of Australia was central to the political storm surrounding the ALP government of 1972-75 and the trigger for its downfall. The idea dropped out of sight with the change of government in 1975, but has recently been resurrected. A study by the Australian Gas Association showed that the efficiency of the electricity supply industry in the eastern states would be significantly improved if a greater proportion of the generating capacity in those states was gas fired. 7 An expansion of gas fired electricity generation would require gas reserves greater than those currently available in the eastern states and a transcontinental pipeline would appear to offer the best means of delivering the gas. The Gas Associa- tion believes that 2010 would be the time by which the gas would be needed.

The initial obstacle to be overcome before large- scale movement in natural gas can occur is the resistance of state governments to interstate trade in natural gas. In the 1970s Western Australia was a vigorous opponent of the transcontinental pipeline because of its desire to use the gas to promote economic development in the state. Now there is no opposition to a transcontinental pipeline in Western Australia as the available resources are seen as more than adequate to meet the needs of the local market. Recently the Commonwealth government and the gas industry have been putting pressure on the governments of Victoria, Queensland and South Australia, as well as the Northern Territory, to allow unrestricted trade in natural gas. Before a transcontinental pipeline is considered, however, a number of other options need to be eliminated.

First, the sedimentary basins in eastern Australia have not been thoroughly explored, with much of the exploration that has taken place focused on the search for oil. The restrictions on interstate trade in gas have also inhibited gas exploration. Gas from the Bass Strait oilfields is the major source to Victoria, but other sedimentary basins are starting to be explored for gas. This exploration would tail off if a firm commitment was given too early to a transcontinental pipeline. Second, the eastern states of Au- stralia contain massive coal deposits that are rich in


methane. Estimates reported by Oldroyd suggest that coal bed methane resources are in excess of Australia's natural gas resources and that they are located close to potential consumers. 8 Coal bed methane cannot compete now with natural gas from eastern states' fields, but it might be able to compete with gas from a transcontinental pipeline in the 21st century. Third, those coal deposits could provide the basis for a coal gasification industry if the costs of coal gasification were to be reduced through tech- nological developments.

The current position of the federal government is to remove restrictions on all aspects of the energy supply industries in Australia to allow them to be market driven. What this also means is that the Australian government will not be taking the lead either through public enterprises, public pipelines or tax-subsidy arrangements to push any particular approach to energy supply to the eastern states.

Are there any prospects for Western Australian natural gas?

The prospects for dramatic developments in the use of Western Australia's natural gas resources are not encouraging.

The Western Australian market has been badly handled by state government policies, initially through the North West Shelf contract, and subsequently by the commitment to coal fired power generation. It will take a change in attitude to the use of gas for power generation as well as renegotia- tion of existing contracts to produce a competitive gas market with gas prices reflecting supply and demand conditions for natural gas. Only with these measures will the gas surplus associated with the existing gas supply contracts be eliminated. In 2005 the gas supply contract between SECWA and the NWSJVP will expire if it is not renegotiated. By then SECWA will no longer exist as it is to be replaced by a gas utility that will play a much smaller role in natural gas supply than SECWA has. Unless there is an expansion of the gas market by then, the NWSJVP will have to compete with other gas producers for sales to the gas utility and major consumers. This may involve a reduction in the NWSJVP domestic market share, although it will have a competitive advantage in being able to use existing infrastructure. The potential for the market to grow is dependent on whether the obstacles to further processing of mineral ores in Western Australia are overcome.

The drive to support new export LNG projects is also lacking. The support given to the North West



Shelf project by the federal and state governments has turned out to be costly and is unlikely to be repeated. At this stage it would also seem unlikely that any new greenfield LNG projects will be undertaken in Western Australia. The North West Shelf project could be extended through the addition of fourth and fifth trains. Gas supplies for additional capacity could be met from resources within the existing NWSJVP production permit areas. Alterna- tively a scenario could be developed which sees additional capacity at the present LNG sites being put in place by, for example, the Gorgon field permit holders, allowing them to take advantage of existing infrastructure. A further development of this scenario could see the North West Shelf project becoming an LNG production and export facility for a number of different sources of gas and an expanded set of participants. The value of this approach would be the resulting economies of scale from the full utilization of infrastructure.

The development of the Tern and Petrel fields into an LNG project would be best carried out through a plant located in the Northern Territory. In that location there would be a local Darwin market for gas to provide additional cash flow, and given further interconnection into other states from the Palm Valley field the current gas flow from the center of Australia to Darwin could be reversed and sent to other states. These possibilities are, however, dependent on the discovery of additional gas in the Tern and Petrel areas.

The possibility of a transcontinental pipeline from

the North West Shelf region or Scott Reef and Brecknock further to the north looks remote at this stage. Only an unsuccessful exploration effort in eastern states' basins, together with no improvement in coal bed methane extraction, should refocus interest in Western Australian gas. In addition there would need to be a change in policy towards major energy projects and new institutional arrangements to cope with the costs and risks associated with a transcontinental pipeline.

This paper is a revised and extended version of a paper given to the 16th Conference of the International Association for Energy Economics in Bali, July 1993.

1E. Harman, 'History and politics of the North West Shelf project', in F. Harman and P. Newman, eds, Energy Policy in Western Australia, Murdoch University, Murdoch, 1984, pp 175- 249. 2Industry Commission, Energy Generation and Distribution, Au- stralian Government publishing Service, Canberra, 1991. 3Report of the Power Options Review Committee, Power Op- tions for Western Australia, 1990. 4Energy Board of Review, The Energy Challenge for the 21st Century, 1990. 5Department of Commerce and Trade, LNG Trade Review, Government of Western Australia, 1993. See also Babak Kiani, 'LNG trade in the Asia-Pacific region', Energy Policy, January/ February 1991, pp 63--75; and Daniel A. Dreyfus, 'The Pacific Rim and global natural gas', Energy Policy, February 1993, pp 133-141. 6'Gulf states gear up for gas exports', The Jakarta Post, 30 July 1993. 7Australian Gas Association, Opportunities for Gas in Electricity Generation, Canberra, 1990. 8G. Oldroyd, 'Economics of coal bed methane in Australia', National Agricultural and Resources Outlook Conference, Can- berra, 1993.


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Western Australian natural gas