Ian Macfarlane (Groom, Liberal Party, Shadow Minister for Trade) Share this | Hansard source

It was encouraging to see that the federal Minister for Resources and Energy travelled to Western Australia on the weekend to see firsthand the scope of the crisis which is currently gripping Western Australia. The minister’s announcement that he would immediately make Job Search support available through Centrelink to those workers who have been stood down because of the crisis is also welcome. Similarly, the Minister for Defence’s release of six megalitres of diesel from Navy supplies to the BP refinery for local market consumption is welcome.

However, fundamentally important is the undertaking of an immediate audit by the National Offshore Petroleum Safety Authority, or NOPSA, of all similar pipelines across Australia where it is believed multiple pipelines have been located in proximity to each other because of conditions imposed in the original approval process. There is a major concern that there may be similar situations in a number of other locations across Australia, and these need to be identified rapidly and rectified as a matter of urgency. Although the state government has announced that an investigation is underway by NOPSA and DoIR into the cause of the incident on Varanus Island, it is vital that this inquiry have the nature of an inquest and that the investigations into the circumstances leading to the explosion and subsequent fire be forensic and detailed in their scope.

The focus by the federal government on retention leases will do nothing to make a real difference in the short term because, regardless of who owns these leases, they still need to be commercial and they still need to be developed over a period of time, which will see none of this gas come on stream for four to five years at the earliest. There will be a number of fields outside those areas under consideration that will come on stream only on the basis that they are commercial, which relies, of course, on clear market signals. It would also be better to focus on stimulating the increase in exploration for, and the production of, smaller fields—focusing on infrastructure, including pipelines and gas gathering infrastructure—and on changing the gas specification in Western Australia. This is well overdue and needs to be addressed as part of a process of ensuring that this sort of gas shortage does not occur again, regardless of any incidents that occur in the gas supply infrastructure.

A worrying signal in this year’s budget was that there were no new budget measures for 2008-09 for offshore petroleum and gas safety. It would be hoped that, with this wake-up call not only for Western Australia but for the whole of Australia, whatever budget allocations are required for safety are not compromised away and are in fact made available. Page 72 of the portfolio budget statements says:

… NOPSA recognises that in an industry where a major accident has the potential to cause a significant loss of life, damage to plant and equipment and affect security of supply—there is no room for complacency.

In fact, this government seems determined to create maximum uncertainty for its own gas consumers with its excise tariff amendment legislation, which is a tax grab, pure and simple, that risks the future stability of the Western Australian gas industry at two levels. Not only does it undermine investment confidence in Australia and in the resource industry but also it creates more questions for WA gas consumers at a time when they are looking for answers and certainty. That is something sadly lacking from this government because it cannot say whether or not the measures will increase the price of gas for domestic consumers in the Western Australian market. It is now more important than ever that this Rudd government not only work to restore confidence in the gas market in Western Australia but not do anything to undermine the WA market.

You would have thought that energy security would have figured very highly in the Western Australian state government’s agenda after nearly eight years in government. The state government did of course intervene in the marketplace with a reservation policy which has not only caused great alarm but also placed in question a number of projects that could, in the fullness of time, have provided further domestic gas supplies to the consumers in Western Australia. In fact, the WA government has been caught out and has been asleep at the wheel in not being proactive in encouraging alternative gas supplies. This is especially so given that on at least two occasions there has been either a serious, widespread outage or an emergency situation due to a shortage of gas supply. To have the Premier, a former Minister for State Development and Energy, who did nothing about ensuring Western Australia’s energy security, now trying to portray himself as Mr Fix-it is just plain disingenuous.

With just one explosion the industry in Western Australia has been crippled. At the very least this event comes as a wake-up call for the construction of a second pipeline from the North West Shelf to supply gas to industry, particularly in the south-western part of Western Australia. It should be pointed out that WA sources its gas from two suppliers located up on the North West Shelf, in the north-west of the state, but transports it only through one pipeline. While ever there is only one pipeline, the state is vulnerable for two reasons. Firstly, if there is an incident on the pipeline, the entire gas supply of the state is affected—not just, as we have in this case, a loss of 30 per cent. Secondly, it really does not matter how much gas is found, the pipeline that exists there already is at full capacity and, if industry is to be able to be sure not only of energy security but also of energy security in a growing sense, a second pipeline is needed. This may not sit comfortably with the monopoly interests of the Dampier to Bunbury natural gas pipeline owners, but it is absolutely central to the long-term energy security of users in Western Australia. Discussions and scoping should commence immediately as to the design and construction of the second Dampier to Bunbury pipeline. The WA gas specification must also be altered to be consistent with the national standard. This is an issue which would allow more gas to come into the system. The current standard seems to be nothing more than an artificial commercial barrier to protect again monopoly interests.

The WA government must also increase its precompetitive geological budget to attract more onshore and near-shore gas exploration to encourage greater production and competition. We note that in this year’s budget there was no mention at all of any increase. The reservation policy of the WA government serves only to lock in WA’s vulnerability by increasing dependence on a small number of players at the very northern end of the pipeline. More effort needs to be put into encouraging exploration for and production of smaller gas fields that lend themselves to domestic supply.

Gas supply volumes post 2010 are unlikely to be a problem, as a number of developing projects are currently underway in response to the increased domestic gas price in Western Australia. Much of the problem of shortage of gas supply has been a consequence of the WA gas market not being fully commercial and the prices being the lowest in the OECD for a long time. We have even heard consumers boast that they are paying less than a dollar for their gas through long-term contracts. Those sorts of arrangements may have been necessary to start the gas market in Western Australia, but they are certainly a thing of the past. The gas market in Western Australia, as it should be everywhere, should be fully reactive to the true commercial price of gas and to its value if we are to see new projects come on stream and new reserves opened up.

Immediate and urgent action is also required to fully investigate the viability of storage. Storage has the ability to smooth out some of the short-term supply problems that occur in all gas supply systems. There are two onshore reserves, near exhausted, that would be an excellent prospect for gas storage. Those prospects, in the Woodada and Dongara areas north of Perth, should be set aside for that purpose and fully investigated. A strategy of gas storage is used here in Australia in the Moomba area. I am sure that the Minister for Resources and Energy will remember that, when the Moomba outage occurred, some of the pressure on consumers could be taken off by supplies being drawn out of that reserve, which is built up during the summer months and fed back into the system, particularly during the high-consumption winter months.

This strategy is also very common in the US and Europe and the appropriate fiscal system could be set up to encourage that to occur. There is enough volume in these particular reservoirs, I am advised, to supply the market for over six months were that to be necessary. At a bare minimum the Western Australian state government, after eight long years, should take an active role in developing these strategic reserve concepts.

A significant part of Australia’s exports rely on these gas supplies and any government should have risk analysis and mitigation procedures in place. Again, I suspect the Western Australia government will be found wanting in this area.

I again put my support behind the Minister for Resources and Energy and congratulate him on the steps he has taken so far. But the real issues lie ahead on this matter. I assure the minister that those of us in opposition will do whatever he requests of us to assist in a very serious situation which will take some time to resolve—most importantly, it is a situation which we need to learn some lessons from to ensure that it does not happen again in the future.

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