Why we’ll all be affected by resources game in North West WA

Some of the biggest resources companies in the world are playing a game of brinkmanship in the North West of the State — and the outcome will affect all West Australians. Woodside, Chevron, Shell, BP, ExxonMobil and BHP have created uncomfortable alliances to develop the oil and gas fields off WA’s northern coast. They each want to prioritise the development of the field in which they have the greatest equity. How much they are willing to pay for that gas to be liquefied in either the Pluto or North West Shelf LNG plants depends on whether their share of the plant is greater than their share of the field.

So, if their stake in the plant is greater than the stake in the field that feeds it, then they want the plant to charge more. If they own a bigger chunk of the field, they want the toll to be lower. It is a complicated, incestuous game that has produced some ridiculous outcomes. Gas from Woodside’s Pluto field went to a new LNG plant built right next to the NWS plant because the ventures could not agree on the terms for what would have been a much cheaper expansion of the existing plant. When Chevron discovered the Wheatstone field next to Pluto, again no agreement was reached. So another LNG plant was built, this time near Onslow.

Tens of billions of dollars have been wasted. Gorgon was delayed for years until Chevron, Shell, and ExxonMobil agreed to have the same interests in all the fields and the plant. About 15 per cent of any gas flowing to the NWS plant must go to the domestic market. Pluto has a similar arrangement. If projects are delayed, or perhaps never happen, there will be less gas flowing south, affecting both the price and supply of gas. WA does not want to see the loss of industry that the Eastern States is seeing. And a lack of projects means fewer jobs.

The energy companies plundering the waters off the North West pay the Federal Government for the gas they extract. This is done through the petroleum resources rent tax, which is based on the profit generated by each project.A less profitable industry, courtesy of inefficient use of infrastructure, means less tax received. It’s not just the bottom lines of the companies that take a hit from poor decisions.