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Gas prices up, Woodside profits up, customers down

by Peter Milne | Jan 29, 2025 | Energy & Environment, Latest Posts

Gas consumers in Western Australian have long enjoyed lower prices than the Eastern states, but those days are done as Woodside doubles its WA gas price. Peter Milne reports from out west.

According to the Woodside’s website, “Woodside has been supplying reliable, competitively priced domestic gas to Western Australia since 1984 and will continue to do so”.

Well, after digging through Woodside’s financial reports over the past ten years, it seems that “competitively priced” means price rises so steep that much of WA’s heavy industry may be uncompetitive if it continues.

Woodside has doubled its WA gas price in 5 years, and local industry in Australia’s largest gas-exporting state is concerned gas producers are prioritising exports at their expense. Woodside supplies 19 per cent of the WA market.

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

There is no reason to believe the prices received by WA’s third biggest supplier are an outlier from its competitors. Chevron, the largest supplier to the market, does not publish its average price.

WA gas prices

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.

Santos and the mythical gas shortage. What’s the scam?

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.

Domestic supply

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.

Republished by permission from Boling Cold, original article here.

Gasbagging. News Corp steps up the hot air, ignores the gas facts

 

Peter Milne

Peter Milne covers energy, industry and climate in WA at Boiling Cold with a focus on the energy transition and benefits to the community, not companies. He previously covered energy for The West Australian and has written for The Saturday Paper.

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