Already struggling to contain costs on the Browse LNG project, Woodside and its joint venture partners face a multi-billion bill for a 650km domestic gas pipeline.
Premier Colin Barnett said that while negotiations over the project had yet to be concluded it would be expected as for other WA ventures to supply up to 15 per cent of its gas to WA industry.
To maximise the value of this gas, he said that a land-backed pipeline from James Price Point to Port Hedland to join the State's pipeline network would ultimately be necessary, rather than allowing the partners to provide offsetting gas from other developments as allowed under State Agreements.
I do not rule anything in or out, but to get the value of what is a significant amount of domestic gas would require a pipeline to be built at some stage, he said.
Obviously, if domestic gas is there, it will not be hard to find someone (other than government) to build a pipeline to run the gas down to Port Hedland, he told a post-Budget estimates hearing.
While Woodside and its partners may be able to find customers or infrastructure groups to underpin the cost of the pipeline, estimated to be in the billions, they may be forced to stump up the funds themselves.
Woodside, which operates the venture on behalf of partners BHP Billiton, Shell, Chevron, BP and Mitsui and Mitsubishi, would not be drawn on the issue, saying yesterday only that it was continuing discussions with government around domestic gas.
Analysts think the massive greenfields venture will cost somewhere between $30 billion and an eye-watering $50 billion, potentially threatening the viability of the development.
BHP and Chevron are said to favour piping gas to the existing North West Shelf plant at Karratha to help offset declining reserves in that project's fields and to shave as much as $15 billion from the cost of processing Browse gas at James Price Point.
Having to build a land-based pipeline for domestic gas may give BHP and Chevron greater sway in their arguments to build a costlier but one-off sea-based pipeline to Karratha and existing LNG facilities and its domestic gas plant.
Opposition spokesman Bill Johnston said the Premier needed give the partners certainty.
One of the biggest dangers to developments in this State is the Premier changing his mind, Mr Johnston said.
There is capacity in the domestic reservation policy to swap gas, to allow a project to come on stream without having to build unnecessary infrastructure.
It may be that the volumes from Browse justify a domestic gas pipeline, but like the troubled Albany pipeline project the Premier can't wish it into existence.
The Browse partners have delayed a final investment decision on their project until the middle of next year.
(Originally published June 5, 2012, in The West Australian.)
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