Ann: NWE: Xanadu-1 Farmout Finalised and Placement, page-38

1. Paul Garvey
   From The Australian
   
   The energy crisis gripping eastern Australia promises to test the commitment of Western Australia’s new Labor government to the introduction of a fracking ban and moratorium, amid forecasts the state could experience its own gas shortage within a few years.
   
   The new government was sworn in on Friday following its landslide victory over the Colin Barnett-led Liberals, and environmental groups emboldened by the emphatic election result have urged Labor to expand its proposed restrictions on the unconventional gas sector.
   
   Labor last year spelt out a policy that would see fracking banned in the southwest of the state and the metropolitan area, as well as a statewide moratorium ahead of another inquiry into the industry.
   
   But the gas shortage behind the energy problem on the east coast has refocused attention on the side-effects of the various bans and moratoria introduced by state governments like of Victoria and NSW in recent years. Those policies have stalled the development of new onshore gas projects, exacerbating supply shortages.
   
   Piers Vestegen, the director of the Conservation Council of WA, said voters had sent a clear message for Labor to extend the ban to other parts of the state such as the Kimberley and Mid West regions.
   
   “The level of public support, the level of public scrutiny and the number of people who have expressed, in the way they vote, support for the campaign really creates a very strong mandate for Labor to uphold its commitment and indeed go further and extend bans into other areas,” Mr Vestegen told The Australian.
   
   He also wants the moratorium to be imposed for several years.
   “We’ve been calling for the moratorium process to extend for a decent period of time so they can undertake the baseline science that’s required to understand our aquifers and groundwater systems and geology,” he said.
   
   The comments will feed concerns within the WA oil and gas industry that the new Labor government could follow the lead of other Labor-led states and eventually implement a statewide ban on fracking, which would have major ramifications for the development of onshore gas fields.
   
   WA has to date been insulated from the same sort of problems plaguing eastern Australia thanks to the scale of its gas industry and a domestic gas reservation policy that requires 15 per cent of gas production to be set aside for local consumption.
   
   But while those domestic supplies should be boosted over the next two years as the big Gorgon and Wheatstone LNG projects crank up their production, those gains could be more than offset by projected declines in output from a number of ageing gas fields.
   Wood Mackenzie analyst Saul Kavonic said that even without a full ban on unconventional gas, WA faced a drop in gas supply in the years ahead.
   
   He said the sharp drop in oil and gas exploration in recent years following the plunge in oil prices, coupled with a series of disappointing results from many recent exploration wells, meant there were few new gas developments coming on stream in the medium term.
   
   “We forecast the WA domestic gas supply to become quite tight from early next decade, so it’s going to be important to encourage continued domestic supply in WA in order to have that supply for our industrial and mining users,” Mr Kavonic said. “It’s a pretty bleak outlook for exploration right now in WA, we’ve seen a collapse in exploration drilling and a collapse in finds.”
   
   The BHP-operated Macedon field and the Quadrant Energy-led John Brookes and Reindeer gas fields are among the projects where output is forecast to slide in the years ahead.
   
   The Waitsia gas discovery of ASX-listed AWE is the most meaningful new source of domestic gas production slated for development in the near term, although it is located in the Mid West region now being targeted by activists.
   
   The abundance of LNG projects in the state and the gas reservation policy means WA is generally seen as well supplied with gas, but Mr Kavonic said that view wasn’t supported by the data.
   
   “My own initial view before I saw the data is we’ve got domestic gas from Gorgon and Wheatstone coming on line so we’re going to be flooded with it. What we forget was that the domestic fields not associated with LNG projects are all in decline and domestic gas from the North West Shelf is also dropping off significantly over the next five years,” he said. “Domestic gas from Gorgon and Wheatstone isn’t enough to make up for the drop off from the NWS and natural field decline. That’s where something needs to give and you do need to find additional sources of supply.”
   
   The pressure on Labor to extend ban into regions like the Mid West and Kimberley, where locally listed Buru Energy is a key player, is in contrast with the strong focus on job creation that helped deliver power for Mr McGowan.
   
   The new premier was also the environment minister who signed off on the development of the huge Gorgon LNG project, a fact that has been regularly mentioned by Mr McGowan as an indication of his pro-business credentials.
   
   The moratorium proposed by Labor would be in place while parliament carried out another inquiry into fracking.
   
   WA undertook an exhaustive two-and-a-half year inquiry into unconventional gas under the previous government that eventually found the risks were negligible and could be managed. Newly sworn-in environment minister Stephen Dawson was part of the five-person committee that conducted that inquiry.
   
   Stedman Ellis, the WA chief executive of the Australian Petroleum Production and Exploration Association, said the group continued to oppose bans and moratoria on fracking.
   
   “Every independent inquiry held to date has confirmed that the risks can be safely managed. We are confident that will be the case in WA,” Mr Ellis said.
   “Onshore gas has the potential to generate jobs and economic development in regional areas. This is exactly what our state needs.”