Delays at Mitsui and Beach Energy’s Waitsia gas project is one of many factors tightening the WA gas market.

Delays at Mitsui and Beach Energy’s Waitsia gas project is one of many factors tightening the WA gas market.

AEMO WA manager Kate Ryan said there was an increasing need for investment in additional gas production.

“While there are many offshore and onshore undeveloped projects that could supply the WA domestic market,these projects are currently too speculative to include in the potential supply forecasts,” she said.

Without those fields,supply is predicted to decline by about 1 per cent a year over the next decade while demand grows at a rate of 2 per cent.

Just five years ago,then-premier Mark McGowan called on east coast gas-consuming industries to move west for a cheap and plentiful supply of their major input.

Now AEMO is warning that demand destruction – the closing down of existing plants – could start when the gas price reaches $9.50 a gigajoule. The average spot price in WA reached this point in September,but almost all gas in WA is sold on longer-term contracts at prices currently much cheaper than this. The challenge will come when those contracts are renewed.

In the near term,AEMO identified the use of gas stored underground and exporters switching to the domestic market as possible solution to the supply-demand gap.

However,a domestic gas price high enough to tempt an exporter to forgo a shipment of liquefied natural gas overseas would be economically prohibitive to most industrial customers in WA.

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AEMO expects a supply shortfall of about 90 terajoules a day for the next three years – about 8 per cent of demand.

The market then improves for a few years when new supply from Woodside’s Scarborough and the Perth Basin comes online,but the reprieve is short-lived,with the demand exceeding supply by more than 150 terajoules a day in 2033.

The dire gas outlook will sharpen focus on the state’s much-touted domestic gas reservation policy that is being examined by a parliamentary committee.

It will be difficult for the government to grant Chris Ellison’s Mineral Resources the exemption from its ban on the export of onshore gas he is seeking.

The government will also not want a repeat of themultiple gas plant problems that caused a shortage in January that put the power generation system to its limits. Any blackouts in the summer of 2024-2025 would be a political disaster just before the March 2025 election.

One possible major shift in demand that AEMO did not address was Alcoa’s consideration ofclosing its Kwinana alumina refinery that would free up gas equivalent to about 5 per cent of demand.

AEMO warned that both its supply and demand forecasts had a high degree of uncertainty.

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