Gas producers, including Woodside, and APPEA have rejected new gas customer-funded research claiming that WA gas demand could double within six years, supporting local industry’s fears that a supply crisis was looming.

The DomGas Alliance, which represents the state’s biggest gas customers, has argued that gas producers have caused domestic gas prices to treble since 2005 by failing to deliver sufficient new supplies into the domestic market.

But Woodside, which is WA’s main domestic gas supplier, argues otherwise.

The company’s director of enterprise capability Keith Spence told a meeting of the Australian Institute of Energy in Perth yesterday that the state’s gas market was in transformation.

According to Spence, until recently gas supply capacity had always exceeded demand by a healthy margin, and with new production being planned, the supply outlook would improve after 2010.

“There are two important conclusions we can draw about the [WA] gas resource,” Spence said.

“First, the state has abundant gas. Second, but more important, the cost of developing further gas supply has increased as reserves move further offshore.

“We are entering a new gas paradigm. The cost of supply has changed.”

Spence said that as a result of the resources boom, many major mineral processors were receiving world class prices for their products.

“They are enjoying the benefits of booming commodity prices but Western Australian gas suppliers are not,” he said.

“WA gas prices have not even remotely kept pace with the rise in global energy prices that are causing the massive capital and operating cost increases in our industry.

“The claim that the price of WA gas is ‘uncompetitive’ is grossly out of line.”

However, with gas prices now finally rising to more realistic levels, Woodside could consider selling gas from its $12 billion Pluto project, near Karratha, to WA industry years earlier than the 2016 deadline set under the state government’s gas reservations policy, Spence said.

“Supply from Pluto could begin as early as the start of the LNG phase in late 2010 and studies are under way to evaluate local gas supply opportunities,” he said.

Spence said the state’s supply-demand picture could be characterised over three periods – short term from now until 2010, medium term from 2010-13 and longer term beyond 2013.

“In the short term to 2009, supply is expected to be tight,” he said.

“In the medium term, the outlook is better. The good news is that price signals are working.

“The recent gas price increases have encouraged the Reindeer and Macedon venturers to re-evaluate their fields.”

APPEA chief executive Belinda Robinson agreed, saying that announcement by Apache and Santos this week that they had started start front-end engineering and design work on their Reindeer gas discovery showed that market interventions, such as gas reservations, were unnecessary.

“This project will go a long way to easing the tight gas market that is currently being experienced in WA,” Robinson said.

“And this is being achieved without market intervention.”

Reindeer, located in the Carnarvon Basin, offshore Western Australia has a gross recoverable resource range of 410 to 640 petajoules and could produce 110 terajoules per day of sales gas with first sales possible in mid- 2010.

Meanwhile, the Dampier to Bunbury Pipeline (DBP) today confirmed it would spend about $245 million expanding the project now that it had finalised contractual arrangements with shippers for additional capacity.

The expansion, to be known as Stage 5A (2), will increase the full haul capacity of the pipeline by about 40 terajoules a day (TJ/day) to about 825 TJ/day.

Stage 5A (2) is underpinned by long-term gas transmission contracts and is fully funded through a combination of new debt and equity facilities.

DBP executive chairman Stuart Hohnen said the new 40 TJ/day of capacity was additional to the 100 TJ/day being provided by the current Stage 5A expansion.

“This is the third expansion project initiated by the current owners of the DBNGP since they took over ownership in October 2004,” Hohnen said.

“It brings the total new capital investment in the pipeline to approximately $1.35 billion since May 2005.”

Hohnen is also the chairman of the DomGas Alliance and he reportedly told the Australian Institute of Energy forum yesterday that research commissioned by the alliance suggested the state’s resources boom would likely increase gas demand by an extra 900 TJ/day within six years. WA currently consumes about 960 TJ/day.

He said 17 planned resources projects worth $23 billion were now potentially at risk.

“The alliance wants the government to tighten regulations, which allow producers to sit on untapped fields by arguing they are not viable and to stop them from jointly marketing gas from co-owned projects such as the North West Shelf,” he said.

Hohnen said Stage 5A (2) will deliver new capacity to existing and new customers in 2009 and 2010. Most of the expansion will involve about 140km of additional pipeline looping.

Construction will begin in 2009 and DBP has entered into a commitment with Metal One for the purchase of the necessary pipes. A tender process for the construction of the additional looping will be conducted during 2008.