Monday, November 10, 2008

Western Australia Natural Gas Bullish for Next 7 Years

DEMAND for natural gas in Western Australia will double in the next six years notwithstanding the collapse of resources projects, as the fallout from the global financial crisis continues.

A DomGas Alliance report says more than 1100 terajoules of extra natural gas will be required each day to meet new and replacement demand by 2014-15.

The forecast appetite for extra natural gas from new projects and to cover contracts expiring in the intervening years is the equivalent of the existing market, the report by Economics Consulting Services says.

"The new projects included in this study are generally in feasibility study stages and are reasonable prospects to proceed subject to acceptable market conditions and regulatory approvals," it says.

"The actual level of demand will depend on gas availability and price. The forecast assumes gas at similar prices to current levels."

Gas prices in WA, which are higher than on the eastern seaboard, are also on the rise.

DomGas Alliance chairman Stuart Hohnen says the Varanus Island explosion -- which wiped out 30 per cent of the state's gas supply -- reinforced WA's dependence on natural gas to generate electricity, fuel industry and supply households and businesses.

"The West Australian market provides the advantages of low sovereign risk, no currency risk, geographic proximity and access to secure long-term contracts.

"The investment and technology thresholds for domestic gas developments are also considerably lower than for liquefied natural gas."

The report says 274 terajoules a day of replacement gas will be required by 2015 to meet current demand for electricity generation, industrial processing and manufacturing as contracts expire. Alumina production is the largest user of natural gas in WA, followed by electricity generation.

The report forecasts demand of 818TJ daily from new mineral and petroleum projects in WA, including expansions of three large iron ore producers and six new mining projects in the Pilbara, coupled with at least five iron ore projects under consideration in the Mid West region, the expansion of two gold mines and the possible development of eight more in the Goldfield region, as well as four nickel projects.

The release of the report follows the opening last Friday of a 320MW gas-fired power station at Kwinana on Perth's southern outskirts.

The NewGen Kwinana power station, a joint venture between ERM Power and Babcock and Brown Power, will deliver wholesale electricity to retailer Synergy and to the South West Interconnected System for the next 25 years.

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