Browse JV signs domgas agreement with WA Govt

Colin Barnett has struck a deal with the Browse FLNG Project to enable offshore development.

Colin Barnett has struck a deal with the Browse FLNG Project to enable offshore development.

A deal between the Western Australian Government and the Browse FLNG Project has cleared the way to develop the project’s offshore gas fields.

The key principles agreement applies WA’s domestic gas policy to an FLNG project for the first time, a move which Premier and State Development Minister Colin Barnett says will “[help] to secure the state’s energy future.”

The Browse deal has committed to providing gas equivalent to 15 per cent of production from the state’s share of the Torosa gas field, one of three which make up the project. This will amount to around 60 TJ/d from Browse, and approximately 800 PJ over the life of the project. The gas obligation will coincide with first production from the Torosa gas field.

The Browse gas fields were discovered more than 40 years ago, but development progress has been slow. An onshore development project at James Price Point in northern WA was abandoned in April 2013, when Woodside Petroleum, the operator of the project, decided that the $A80 billion price tag was too costly to represent a positive final investment decision.

While Mr Barnett and the WA Government would prefer the onshore option, the Premier has stated that “this agreement ensures that the project will deliver benefits to the state in terms of domestic gas and opportunities for local businesses and workers.”

“It also clears the way for the extension of the retention leases covering the project fields, and provides the Browse joint venture with certainty as it heads towards the front-end engineering and design phase.”

The agreement also contained a commitment by the Browse joint venture to the development of an integrated supply chain in WA to provide port, marine, aviation, storage and transport services over the life of the project. This will consist of “a primary operations base in Perth, as well as support locations in the North-West,” and will provide “full, fair and reasonable opportunities for local industry participation, including for Aboriginal businesses and employment,” Mr Barnett said.

Decision amounts to de facto tax: APPEA

The Australian Petroleum Production and Exploration Association (APPEA) criticised the deal, with APPEA Western Region Chief Operating Officer Stedman Ellis saying that the decision to force projects to reserve gas for the state’s domestic market amounted to a de facto tax.

“In what is now a new investment climate, the Government should be looking to reduce the cost and regulatory burden on LNG projects if it wants to attract investment,” Mr Ellis said.

“Instead, it continues to do the very opposite by imposing a gas reservation policy that simultaneously acts as a tax on gas production and a subsidy on gas consumption.”

Mr Ellis disagreed with the Premier’s assertion that the policy is important for the state’s energy security, and warned that it could have economic consequences. 

Participants in the Browse joint venture include Woodside as operator, Shell Development Australia, BP Developments Australia, Japan Australia LNG (MIMI Browse) Pty Ltd and BHP Billiton Petroleum (North West Shelf) Pty Ltd.

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