W Australia favours new gas projects [NGW Magazine]

Western Australia’s upstream has avoided much of the furor that has surrounded the east coast’s natural gas sector, largely owing both to plentiful local gas supplies and the lack of an unconventional resource boom.

The state has attracted billions of dollars’ worth of investment in its offshore gas fields, while its onshore shale gas potential has remained comparatively unimpressive. WA now appears to be committed to maintaining this status quo, unveiling controversial new emissions regulations that support unsanctioned mega-projects even as it adopts a more conservative approach to hydraulic fracturing.

WA energy minister Bill Johnston introduced a new emissions policy to parliament on August 28, in which Perth pledged to work with the federal government to achieve a national emissions reduction target of 26-28% by 2030. While an “aspirational” target of net zero emissions by 2050 was unveiled, Johnston revealed that major new projects would be allowed to propose their own interim targets for cutting carbon emissions as well as associated timelines.

Less than a week later and the government finally lifted a state-wide moratorium on fracking, leaving in place a ban that still blankets 98% of the state. 

Relaxed requirements

In addition to allowing corporates to set their own emissions reduction agendas, the new legislation also excludes all indirect emissions occurring in the reporting company’s value chain, known as Scope 3 emissions. The policy will also consider credible international offsets to limit abatement costs.

Johnston has described the policy as being “sensible and balanced” and that the aspirational target for 2050 “provides the certainty needed for future major projects.”

“[The policy] is designed with flexibility in mind and it will be up to proponents to outline their strategies to avoid, reduce, mitigate and offset the project’s direct emissions in a way that contributes towards the state’s aspiration of net zero by 2050,” The Australian Financial Review quoted a government spokesman as saying.

The policy was introduced ahead of the September 2 deadline for the WA Environmental Protection Authority’s (EPA) 12-week consultation period over new emissions guidelines.

The independent agency had postponed its plans in March to introduce guidelines requiring any project with more than 100,000 metric tons/year of direct carbon emissions to offset these through environmental projects. The EPA opted to review its guidelines following industry complaints over a lack of consultation and at the WA government’s urging.

With the waiting period over, the EPA announced on September 3 that it would push back its timetable for guidelines to early 2020.

Rulebook rethink

EPA chairman Tom Hatton said the agency would redraft its guidelines after it had reviewed the 6,500 submissions it had received during the consultation. Despite the timing of energy ministry’s new policy, Hatton said the EPA could still include Scope 3 emissions within the reporting requirements.

“The guidance will make clear the expectations of the EPA for a proponent to avoid, reduce and then offset its greenhouse gas emissions,” Hatton said. “The EPA is yet to determine which scopes of emissions it will consider as part of assessing significant proposals as it is currently analysing the submissions received.”

Some of the government’s critics are worried, however, that Perth has cut the EPA off at the knees.

“At the behest of the WA government, [the EPA has] revisited and consulted on this policy and, before it can even report back to the minister for the environment, the minister for mines comes back with carte blanche for the gas companies,” Guardian Australia quoted the director of the Australia Institute’s climate and energy programme, Richie Merzian, as saying.

Johnston has dismissed such concerns saying the government would “always respect the independence of the EPA.” He added: “The EPA has historically called for more clarity from government about its policy on greenhouse emissions – this policy provides that clarity going forward.”

Although the industry has welcomed the new legislation, a Woodside spokeswoman said the EPA “must take the same approach as it consults on its proposed new guidelines on greenhouse gas emissions.”

The state, known for major offshore projects such as the North West Shelf (NWS) and Gorgon, is keen to smooth the way for new developments that have yet to reach a final investment decision (FID). Providing a three-decade window for developers to reduce emissions should prove attractive when it comes time to approve the delayed Browse and Scarborough projects, for example.

While the Perth government appears to be at odds with the EPA over emissions standards, it has embraced the agency’s recommendations for unconventional resource development and has strengthened the EPA’s oversight of the sector.

Go slow

The government amended its policy on fracking in early September, ending a state-wide moratorium that had been in place since September 2017. The ban will be upheld over 98% of the state and has been changed to allow the use of the drilling technique in existing petroleum licences. Companies are also required to refer all upstream projects to the EPA for assessment.

Premier Mark McGowan announced in November 2018 that he intended to reduce the scope of the ban, following the release of a 12-month, government-commissioned inquiry that was led by the EPA’s Hatton. The inquiry found that the risk of fracking was low if the process was carried out safely and made 44 recommendations to tighten regulations.

The recent amendment prohibits fracking within 2 km of public drinking water sources, in national parks, towns and the Dampier Peninsula. Traditional landowners and farmers will have the right to veto fracking on their land. Johnston added that a new code of practice prescribing minimum enforceable standards for hydraulic fracturing activities would be developed.

Compared with Queensland and New South Wales, WA’s unconventional potential is at a relatively early stage of development. The government was quick to pledge a ban on fracking as part of its election campaign in response to protests, which was a relatively easy win considering its limited impact upon the wider upstream. Staging a more regulated return to unconventional development only makes sense from a political perspective.

The move is not without upside for the industry, however, given that it establishes a regulatory framework for shale gas developers to work within. As long as such projects can be demonstrated to be low-risk, then the government will have the grounds for further relaxations further down the line.

Political manoeuvring in both the offshore and unconventional sector comes at a time of increasing concern over the state’s future gas supply. 

Supply squeeze

In its WA Gas Statement of Opportunities – December 2018 report, the Australian Energy Market Operator (AEMO) warned that the state’s gas supply would decline through to 2021 as existing reserves depleted. Potential gas supply from existing and under-construction resources is also projected to be insufficient to meet even the low case for forecast demand from as early as 2022.

Concerns over gas supply have also been highlighted by the consortium developing one of WA’s more exciting onshore plays.

“The east coast has a number of issues that need to be resolved and there’s a number of companies that are positioning themselves in the market to be that company that resolves those issues,” Warrego Energy CEO David Casey said in an interview late last month. “Don’t assume that the same issues aren’t emerging on the West Coast. The North West Shelf is short gas in a couple of years.”

Warrego Energy and Strike Energy are 50:50 partners in the Perth Basin’s EP 469 block, where “significant” gas discoveries have been made in all three of its formations.

Casey said that while there was no “logical supplier” to fill the projected shortfall, adding: “You’ve got infrastructure in place that needs gas, that needs a feedstock, and I think we can be that feedstock.”

With gas supplies running low it is of little surprise that the McGowan government is striving to ensure major new projects see the light of day.