Speaking at the Western Australia Petroleum Club last week, Mr Gallagher said the with some of the major LNG project’s primary gas fields tipped to run low in the coming years, deals made with nearby domestic producers could both extend the life of the plants and increase local exploration and supply.
“Some domestic gas producers, including Santos, have projects close to LNG infrastructure and with low development costs that could provide LNG producers with exactly the edge they need in what is currently a highly competitive market for new LNG contracts,” he said.
“Without access to LNG infrastructure or other higher-priced markets, the economics of some of these projects, despite low development costs, will be very challenged, particularly when there is a risk of displacement by LNG gas that is sold on a compliance basis.”
Under the current WA gas reservation policy, LNG operators are required to devote 15 per cent of production to the domestic market.
A comparable policy has been floated on Australia’s east coast to help lower domestic prices, but Mr Gallagher said WA could also face increasing prices if supplies to the state’s major LNG projects began to dwindle.
LNG operators, including Woodside, have reportedly been considering terms with third parties in order to attain new gas supplies.
For more information visit the Santos website.
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