Waitsia Gas Project Delays Prompt Export of WA's Domestic Supplies

The Waitsia Gas Project, located southeast of Dongara in Western Australia, has faced significant delays that have resulted in the diversion of domestic gas supplies for international export. Originally slated for completion in late 2023, the project has encountered construction costs that have nearly doubled the initial estimate of $700 million. This development is backed by Kerry Stokes, a prominent Australian media mogul, whose company, Seven Group, has a stake in Beach Energy, one of the project’s primary operators.

The project received a critical exemption from Western Australia’s government ban on the export of gas extracted from onshore reserves, allowing it to export up to 7.5 million tonnes of liquefied natural gas (LNG) until 2028. However, as of now, the project remains unfinished, prompting its owners to source gas from the local market to fulfill international obligations. These swap arrangements have reportedly led to the diversion of approximately 180 terajoules of gas per day, representing around 15 percent of the gas utilized in the local market at various times since late 2023.

According to data from the Australian Energy Market Operator, this diversion has raised concerns over the integrity of Western Australia’s domestic gas market. Peter Strachan, a veteran resources analyst, expressed skepticism about the legality and ethics of the situation, stating, "It might be good business operations, but I think it goes against the whole idea that the gas in Western Australia is for West Australians to consume."

The decline in domestic gas prices—from $11.60 per gigajoule in late 2023 to $6 per gigajoule recently—has further complicated the situation. While this price drop benefits local consumers, it has led to what some industry analysts describe as a serendipitous opportunity for the Waitsia project partners to export gas while maintaining cost advantages.

Richard Harris, spokesperson for the DomGas Alliance, which represents major gas users like Wesfarmers and Alcoa, criticized the export practices, asserting that domestic gas should not be allocated for international sales. He emphasized that while current gas prices may appear favorable, they are unlikely to remain stable. Harris warned of a potential gas shortfall in the near future, forecasting significant supply issues by 2028.

The WA government has responded to the growing concerns, stating that the swap arrangements should not negatively impact domestic gas supply commitments once the Waitsia project becomes operational. However, critics, including Shadow Energy Minister Steve Thomas, argue that the government’s gas policies have been mismanaged, noting that the original intent of ensuring local gas supplies has been compromised by export activities.

With construction delays largely attributed to the collapse of Clough, the company initially tasked with building the project, the future of the Waitsia project remains uncertain. As the project partners grapple with meeting their export quotas, industry analysts question whether sufficient reserves will be available to satisfy both domestic and international demands in the years to come. The situation continues to evolve, highlighting the delicate balance between domestic energy needs and international market pressures in Western Australia’s gas sector.