Waitsia gas project delays leave Kerry Stokes-backed firm exporting reserved WA supplies

Australia Broadcast Center

20-07-2025

A gas development backed by media mogul Kerry Stokes has been tapping into Western Australia's domestic gas market to supply overseas customers amid long delays in the delivery of the plant.
At the time, the project was supposed to cost $700 million and be operational by late 2023.
Mr McGowan said unless Waitsia was exempted from the ban, "the project might not happen" and the gas may have stayed in the ground.
But almost two years after that deadline and with a construction bill running at almost double the original estimate, the project is still not ready.
In the meantime, the ABC can reveal the project's owners have been taking gas from the domestic market to supply their customers overseas.
Waitsia's owners are Beach Energy — the ASX-listed gas producer backed by Seven Group, the conglomerate controlled by Mr Stokes — and Mitsui, a Japanese trading firm.
Filings by Beach and public reporting of supplies to and from the Dampier to Bunbury gas pipeline — WA's main energy artery — suggest the partners have sent more than a dozen liquefied natural gas (LNG) cargoes since late 2023.
As much as 180 terajoules a day — or roughly 15 per cent of the gas used in the local WA market — has been diverted for export at times during that period, according to the Australian Energy Market Operator's gas bulletin board.
In its filings, Beach said the gas has been sourced via so-called swap arrangements, in which the company takes existing supplies from the domestic market on the promise it will return an equivalent amount later when Waitsia is up and running.
The gas is processed into LNG at the North West Shelf, a giant plant in the Pilbara where supplies have been dwindling for years.
While neither company would comment, Waitsia's backers have pointed out that prices for gas in WA's domestic market have been falling in recent times.
From as much as $11.60 a gigajoule in late 2023, according to Perth-based firm Gas Trading Australia, prices on the spot market had fallen to just $6 a gigajoule.
On the east coast, by contrast, prices were trading between $10 and $15 a gigajoule.
Peter Strachan, a veteran resources analyst, said the fact prices had been falling while Waitsia's partners were exporting domestic gas was nothing more than luck.
Mr Strachan said while there was nothing unlawful about what the partners were doing, it raised questions about the integrity of WA's domestic gas market.
"It's serendipity," Mr Strachan said.
"It might be good business operations, but I think it goes against the whole idea that the gas in Western Australia is for West Australians to consume.
"And that's whether it's today or tomorrow or in 10 or 20 years' time."
Under WA's laws, the market is supplied courtesy of a 15 per cent reservation policy on offshore fields.
It is also supplied by onshore fields.
Up until the exemption awarded to Waitsia, onshore projects had exclusively supplied the local market.
After years of chopping and changing policy, the WA government last year said it would allow onshore developers to export up to 20 per cent of their reserves but only until 2030.
By that time, the Australian Energy Market Operator has forecast that WA will enter a structural deficit of gas, sparking warnings that some users could be pushed to the wall.
Mr Strachan said some of the problems that had bedevilled Waitsia were beyond the control of its owners.
Chief among them was the collapse of construction company Clough in late 2022.
But he queried why Beach and Mitsui were being allowed to take relatively cheap gas from the domestic market to cover their position with buyers overseas.
"They had to find some gas from somewhere to meet those obligations they couldn't meet because their project was basically two years delayed," he said.
"You would have thought if they were stuck and had to find gas, they could have … bought that gas on the open market from the North West Shelf or from Gorgon or from somewhere in Kuwait.
"But they might have made a loss doing that.
The DomGas Alliance, which represents some of Australia's biggest gas users such as Wesfarmers, Alcoa and Yara, was equally sceptical.
DomGas Alliance spokesman Richard Harris said taking gas from the local market to sell internationally flew in the face of WA's domestic policies.
"Domestic gas, when it's in the market in WA, is for WA use, not for export," Mr Harris said.
Mr Harris said it was true domestic users were currently enjoying a period of relatively subdued pricing.
But he said that reprieve was likely to be temporary.
What's more, he said it had been largely caused by the loss of some major gas customers, such as mining giant BHP's Nickel West division and an alumina refinery owned by Alcoa.
There had also been, he noted, a short-term bump in extra supplies from Woodside's Pluto project following scrutiny from a state parliamentary inquiry.
"All forecasts say that is just a short-term phenomenon," he said.
"Within a couple of years, we're going to be heading for a shortfall, and that's certainly what all the forecasts say by 2028, we're in for a significant shortfall of gas."
The WA government declined a request to be interviewed about the exports.
Instead, it issued a statement in which a spokesperson said Waitsia's export approval also came with a commitment to supply domestic gas.
The spokesperson also insisted swap arrangements pursued by Waitsia's partners would have little effect on the domestic gas market.
"No further swap arrangements are anticipated once the Waitsia gas plant is operational," they said.
"The export of these LNG cargoes does not impact the delivery of Waitsia's domestic gas commitment."
Shadow Energy Minister Steve Thomas was not as charitable.
Dr Thomas said the export of domestic supplies was clearly never intended by those who designed the state's domestic gas policy.
"I don't think the architects of the domestic gas policy ever expected that onshore domestic gas would have to be substituted into the offshore market to meet existing contracts," Dr Thomas said.
He argued the government had been so inconsistent in its management of domestic gas policies that they had been turned into a mess.
"So the domestic gas policy either stands up or it doesn't," he said.
Under the terms of the deal in 2020, the Waitsia partners were allowed until the end of 2028 to export 7.5 million tonnes of LNG.
Mr Harris from the DomGas Alliance noted that the project partners were fast running out of time in which to meet their export quotas.
Given the lucrative nature of the overseas LNG market, where gas can fetch far higher prices than from domestic buyers, he anticipated a push to extend the export approvals.
But he stressed it was something the alliance would oppose.
And he warned a failure to do so would risk higher gas prices and "mean the projects that we want to happen like critical minerals won't be able to find gas".
"They [Waitsia] were always given a timeline when they had to deliver their bargain to the state, which was to deliver gas into the domestic market in 2029," Mr Harris said.
"And that timeline should stick."
Peter Strachan agreed but wondered whether Waitsia would still have the reserves to supply the WA market after 2028, noting the project's partners had been progressively writing down their estimates of the gas contained in the field.
"Where they thought there would be gas they've drilled and 'oh, there's no gas'," Mr Strachan said.
"They're lucky now that they've actually got enough gas to meet their commitments. But where does that leave the local consumer?"