WA’s gas shortage is a joke – at the public’s expense

Can you imagine Qatar or Saudi Arabia panicking about a gas or oil shortage?

It sounds like a joke. And it would be.

Like Qatar and Saudi Arabia, Western Australia is a major producer of gas. In fact, if WA was a country, it would be the third-largest liquefied natural gas exporter in the world, beaten only by Qatar and the USA.

The Australia Institute has taken to using a Perth billboard to voice its view.Credit: Peter Milne

And yet last week WA Premier Roger Cook urged gas companies to develop large reserves off the coast of WA to deal with a “shortage.”

The premier is wrong. The so-called shortage relates to the fact that 90 per cent of gas produced in WA is used for exports, mostly to Japan and China.

WA produces more than enough gas; it just does not keep enough. Exporters use more of the fuel to run their own vast processing plants than any other industry in WA. The export plants burn twice as much gas as is used to generate power in WA.

And while huge amounts are exported from WA, it is not by West Australian companies.

A handful of multinational gas giants – Chevron, Shell, ExxonMobil and others – dominate the business.

Perth-based Woodside does not disclose its level of foreign ownership, although at least 23 per cent is with American investors.

Overall, gas exports from WA are at least 80 per cent foreign-owned.

This matters for two reasons.

First, the foreign companies that control WA’s and Australia’s gas resources do not necessarily act in the best interests of the state or the country.

A WA parliamentary inquiry recently investigated the operation of the state’s domestic gas reservation policy.

It found gas exporters are meant to supply 15 per cent of gas produced to WA, but they have actually delivered just eight per cent. It is clear these companies are under-supplying the WA market. There is no shortage.

This provides a convenient excuse for Premier Cook and others to push for yet more large new gas projects. The new projects would also be export-focused and do little to solve WA’s energy problems. It’s a game of smoke and mirrors.

Second, the significant foreign ownership of gas exports means that most of the benefits flow to overseas owners. Very little benefit is received by the WA public because gas companies receive most of the gas they export royalty-free.

Read that again if you have to – most gas is royalty-free.

Iron ore mines pay royalties. Gold mines pay royalties. The vast majority of WA’s gas is extracted and exported without paying any royalties.

Worse, gas companies often pay little, if any, company tax or petroleum resource rent tax. The federal government collects more revenue from university HECS payments than from the PRRT.

In 2021-22 Chevron, Exxon, Woodside and Shell made $55 billion selling Australian gas and paid just $1.7 billion in company tax and PRRT. Gas companies aren’t paying their fair share of tax.

Returning to the phony shortage, any domestic shortfall could be solved simply by ensuring these
companies comply with their obligations under the gas reservation policy.

The fig leaf for the gas shortage fiction in WA is a report known as the Gas Statement of Opportunities.

Its author, the Australian Energy Market Operator, forecasts in it that in some circumstances WA gas consumers could be left short. But the trick being played by the premier and the gas industry is not noting that the report work assumed gas companies in WA would continue exporting gas without limits.

Under this assumption, companies would always prefer to profit by exporting gas to receive higher international prices.

But in the real world, the WA and federal governments have a choice. They could stand up for the interests of West Australians and ensure a sufficient supply of gas.

It is a choice for the premier not to stand up to the gas companies. It is a choice to hand control of the public’s resources to foreign-owned corporates. It is a choice for the Commonwealth not to charge royalties and not to raise more revenue from the petroleum resource rent tax.

The gas industry gets away with this pantomime because of a political and media echo-chamber that never asks the hard questions about the gas industry.

At least in Qatar and Saudi Arabia the governments don’t pretend they aren’t joined to the gas industry at the hip.

And the locals aren’t ever told that they’re running short.

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