1. Gas Reform In Western Australia Including Upstream Centre for Mining and Energy Upstream Gas Regulation and Competition Reform Sydney 14-15 October 1998 K Peter Kolf Office of Energy - Western Australia

2. Overview l History of Gas Reform in WA l Gas Industry in WA l Downstream Access Arrangements l Upstream Access Issues l Benefits to Western Australia and Australia

3. History of Gas Reform in Western Australia l Gas has been top on the agenda in WA l WA - an early leader in gas reform l Bipartisan support for gas reform l Encouraged recovery of associated gas - since the early 90s

4. Gas Reform in WA l Diversified WA gas market not accident l Disaggregation of NWS contract l Deregulation of Pilbara market l $2.4 billion privatisation of DBNGP l Totally open market by 1 July 2002 l Sale of AlintaGas under consideration

5. l > 75% of Australian natural gas resources l 700 PJ natural gas produced in 1996/7 l 281 PJ natural gas used in WA in 1996/7 l Gas resources - approx 100 years left l LNG from NW Shelf - 10% of world trade Natural Gas in Western Australia

6. Domestic Gas Supplies 1997 (TJ/d) Carnarvon Basin BHP Petroleum (Australia) Pty LtdGriffin Gas Gathering 17 Boral Energy Resources LtdTubridgi 21 West Australian Petroleum LtdThevenard Island Gas Gathering 12 50 East Spar Joint VentureEast Spar 40 Harriet Joint VentureHarriet Gas Gathering 79119 North West Shelf Gas JVNWSG Project 428428 Perth Basin Boral Energy Resources LtdBeharra Springs 29 CMS Gas Transmission of Aust.Dongara 11 Phoenix Energy Pty LtdWoodada 4 44

8. North West Shelf Gas Largest Australian resource development project »Total capital outlay $12 billion »Sale of natural gas to the domestic market »Export of LNG and LPG (primarily to Japan) »Sale of condensate to the local and international oil market.

9. Gas Pipelines Access (WA) Bill 1998 l Makes the National Access Law a law of WA l Gives legal effect to the Code l Formalises derogations & transitional arrangements l Expected to commence in WA end of November 1998 l Derogations for DBNGP, GGP & SWDS to 1/1/2000

10. WAs Code Bodies »State-based Independent Gas Pipeline Access Regulator »State-based Gas Disputes Arbitrator »State-based Gas Review Board »The Supreme Court of Western Australia »Designated State Minister

11. Natural Gas Upstream Issues l The Upstream Issues Working Group (GRIG) l Consultation paper - submissions by 25 September l Key Issues: (impact on downstream competition) 1. Acreage Management Systems 2. Third Party Access to Upstream Facilities 3. Marketing Arrangements

13. Access To Upstream Infrastructure l No restrictions on entry to upstream l Market access available l Access to sales gas pipelines available l Government not involved commercially l Market becoming more mature l Is anything more needed ?

14. The Varanus Hub WA Domestic Gas Harriet & East Spar Joint Ventures: l Have sold 220 TJ/d to South West and Goldfields industrial markets; l Are increasing capacity to eventually supply 500 TJ/d l Export in excess of 3 mmbbls pa of crude and condensate l Have negotiated access to Harriets Varanus Island facilities and the sales gas pipeline.

15. The Varanus Hub Upstream Access in WA l A negotiated, commercial arrangement l Harriet provided access to leases, crude storage and load out and sales gas pipeline l East Spar constructed its plant and pays tolls to Harriet for use of infrastructure l Each Joint Venture supports the other increasing customers supply reliability l Both Joint Ventures funding a share of a second gas pipeline to shore

16. Benefits To Western Australia l Competitive gas prices l Diversification in gas supply l World competitive gas industry l World class oil & gas expertise l Competitive resource development l Downstream processing & development l High export earnings

17. Natural Gas Demand Western Australia

18. Environmental Outcome In 1996-97: l Primary energy demand decreased by 1% l Final energy demand increased by 2.6% l Carbon dioxide emissions decreased by 1.7% Why? è decrease in primary energy use è change in the mix of primary energy i.e. (i) increase in the contribution of gas (ii) decrease in coal, oil and condensate

19. Conclusions »Access by commercial negotiation working in WA »Access assisted by Government open market approach »Fundamentals support efficient outcomes & international competitiveness »Environmental benefits from sharing facilities »WA not seeking to impose new mandatory access regulations »WA would support a voluntary code that states commercially realistic principles