Major disruption to natural gas supply in Western Australia
The Western Australian gas crisis was a major disruption to natural gas supply in Western Australia, caused by the rupture of a corroded pipeline and subsequent explosion at a processing plant on Varanus Island, off the state's north west coast on 3 June 2008. The plant, operated by Apache Energy, which normally supplied a third of the state's gas, was shut down for almost two months while a detailed engineering investigation and major repairs were carried out. Gas supply from the plant partially resumed in late August. By mid-October, gas production was running at two-thirds of normal capacity, with 85% of full output restored by December 2008.
In a state heavily reliant on continuous supply of gas for industrial processing, manufacturing, residential use and electricity generation, the sudden loss of almost 35% of gas supply had immediate social impacts, and significant short and long-term economic effects. Many businesses were forced to curtail or cease operations, resulting in workers being stood down or forced to take annual leave, and the government requested that businesses and householders conserve energy usage. An emergency coordination committee of government and industry representatives rationed and redirected remaining gas supply sources. When many large gas users switched to diesel for power generation, the risk of a shortfall in transport fuel led to the federal government authorising the release of emergency fuel reserves stored at the Garden Island naval facility.
The incident raised significant public and political issues related to energy security, adequacy of existing infrastructure, contingency planning, and the role of regulatory agencies. The plant took three months to repair, although partial supplies were restored within six weeks of the explosion. A major investigation was launched by the National Offshore Petroleum Safety Authority (NOPSA), with separate investigations conducted by the plant operator and several other government agencies. NOPSA's report was published on 10 October 2008, and confirmed early suggestions that the explosion was caused by structural failure of the export pipeline due to significant corrosion. A Senate Committee inquiry was established to investigate the economic impacts and the state government's response to the crisis. The committee's report was handed down on 3 December 2008.
Background.
Since 1996, Varanus Island, from the Western Australian coast, has operated as a hub for oil, condensate and gas gathering infrastructure belonging to several petroleum joint ventures, including Harriet JV and John Brookes JV. The island's facilities include large tanks where condensate is stored prior to being offloaded onto tankers, and five gas plants. Condensate, water and other impurities are removed from the gas arriving from the offshore platforms connected to the island. Most of the carbon dioxide is removed so the gas can meet the specifications of the onshore pipelines and end users. Gas from the plant is sent via two subsea pipelines to the mainland, where the pipelines connect to the Goldfields Gas Pipeline and the Dampier to Bunbury Natural Gas Pipeline. Before the incident, the plant produced 365 terajoules of gas per day for the state market.
The gas plant is licensed under the WA Petroleum Pipelines Act 1969. Safety and health regulation under this Act is the responsibility of the Department of Mines and Petroleum (DMP), which engaged National Offshore Petroleum Safety Authority (NOPSA) to provide inspections and reporting.
Incident.
At 1:40pm on Tuesday 3 June 2008, an export gas pipeline ruptured near the gas plant, causing a fire in a large section of the plant. No one was injured and all employees on the island were moved to a safety point within 20 minutes of the explosion. One hundred and fifty-three staff were evacuated later that day, with 13 staff staying on the island to monitor the situation. Chief Executive Officer G. Steven Farris said, "Our priorities are the safety of our personnel, securing the facilities, assuring that the environmental impact is limited to the island and resuming throughput of oil and gas production...No-one was injured, all personnel are safe, and the rupture and fire appear to be contained on the island."
The explosion and resulting fire caused a full plant shutdown, reducing Western Australia's supply of energy by up to 35%. Apache's managing director, Tim Wall, said, "It's pretty easy to say there is a lot of damage here and we are looking at alternatives to try to get gas to market as soon as possible but it will be at least several months before we have partial sales." He estimated it would be at least three months until the plant was at least partially operational, when the less-damaged processing plants for John Brookes and East Spar are brought back online. The John Brookes and East Spar plants produce 150-200 terajoules of gas daily, compared to 370 terajoules when all plants, including the significantly damaged Harriet plant, were fully operational. Approximately 80-90% of the island's gas is used by industrial customers, with small amounts provided to Synergy, the state's largest electricity retailer.
Political response.
The explosion was investigated separately by Apache Energy, the National Offshore Petroleum Safety Authority (NOPSA) and other agencies. The WA State Opposition called for a Royal Commission, with Energy Spokesperson John Day saying, "It's a matter of making sure that this major disaster, which is now facing WA, does not happen again". Western Australian Premier Alan Carpenter said this was unnecessary because the National Offshore Petroleum Safety Authority was investigating and it could compromise their inquiry. Carpenter said their investigation will take 10–12 weeks to complete and its findings will be released to the public. State Opposition Leader, Troy Buswell, said that NOPSA had a conflict of interest as it helped perform safety inspections on the island, and therefore "are conducting an investigation which will in part be an investigation into themselves".
Premier Carpenter held a meeting on Sunday 8 June with key stakeholders in WA's gas industry and announced that gas would be sourced from alternative suppliers, and a coal-fired power station, which was shut down for maintenance, would be brought back online. He also asked domestic users to save energy where possible, as the saved energy could be used by industries in need.
On 11 June, Carpenter warned he might need to invoke emergency powers and take control of all of WA's gas and electricity supplies, which would result in rolling stoppages, blackouts and brownouts. He also said he had discussed accessing emergency diesel supplies stored by the Department of Defence at Garden Island with Acting Prime Minister Julia Gillard. The state's Energy Minister, Fran Logan, said the decommissioned Muja AB coal-fired power station at Collie would be returned to service to supply 25 terajoules to industry. He estimated it would take up to six weeks before the plant was operational, and said, "These units are old and not as environmentally friendly as new generators. However, the state is facing a significant gas shortage and we need to look at all avenues".
Power consumption will be reduced from 22 megawatts to four megawatts a day at the State Government's water desalination plant in Kwinana, announced Carpenter on 12 June. He said this "will save around about five to six terajoules of energy a day which can be redirected to where it's needed...The decision will not jeopardise water supplies. We are able to switch the desalination plant back on to full production within a few hours ... four to five hours."
On 17 June, two weeks after the explosion, Carpenter made an unprecedented public address on television and radio.
"Gas is not only a direct fuel source for industry, we use it in our homes and it's used to generate a large proportion of our electricity. While the State Government has the power to guarantee gas supplies to essential services and households, some industries and business have been hit hard. A number of them are being forced to scale back operations and others have temporarily closed... We need your help. By continuing to work together we can lessen the impact of the gas shortage on our state, on our businesses and our families." – Carpenter, 17 June 2008
David Black, a political analyst, said Carpenter's address shows that the situation is serious: "Probably in terms of the total amount of gas and electricity being used, the community is a relatively small player...But politically, it is so important that they share the burden and that they be aware of the fact that they should be sharing the burden." Opposition Leader Buswell called for daily publication of a gas supply allocation for businesses. After Carpenter's address, power consumption fell 2% the next morning, on the coldest day since September 2007. Carpenter said, "The saved consumption was very, very significant, enough to power the city of Geraldton".
On 18 June, Prime Minister Kevin Rudd told Federal Parliament that Premier Carpenter had established a Gas Supply Coordination Group, involving government agencies and industry representatives. Rudd said the Royal Australian Navy was supplying six megalitres of diesel fuel to WA, and the Federal Government would consider invoking the Liquid Fuel Emergency Act if necessary, enabling federal Minister for Resources and Energy, Martin Ferguson, to control production, transfer and stock levels of crude oil and other liquid fuel.
"This is a serious matter for Western Australia therefore it is a serious matter for all Australians... We believe that is an appropriate level of coordination between the two governments... I think people in the east have not quite caught up with the severity of the impact which this is having across the WA economy. It is huge... If there is a significant impact on WA economic activity and growth and on exports from that state, given the significance to the overall Australian economy, there will be wash through from us all on this over time." – Rudd, 18 June 2008
On 21 June, it was revealed that the state-owned electricity generator Verve Energy continued to use hundreds of terajoules of gas each week, despite having access to diesel fuel. A spokesperson said the company had not been instructed to cut back its gas usage, and there was "no intention to use very expensive diesel instead of gas, especially when supplies and deliveries of diesel are stretched and Verve Energy continues to receive its supplies of gas from the North West Shelf". Opposition Leader Troy Buswell said, "This is arrogance and hypocrisy of the highest order... They should be substituting gas for diesel, given the fact their plants can run on diesel. Gas could be re-directed to businesses which don't have choice about using gas or diesel." The State Government had also delayed approval of a new gas processing plant for Apache Energy by over six months, only allowing Apache to proceed after the gas crisis commenced and worsened.
The lack of a State Government contingency plan was criticised by Robert Amin, Curtin University's chair of Petroleum Engineering and chair of the Woodside Research Foundation, who said the Government should have stored enough gas in underground reservoirs to power the state for at least one month, to mitigate a potential crisis. Amin said gas could be stored in parts of the Perth Basin depleted of gas, like Dongara, and companies could be offered tax incentives. Federal Opposition spokesperson for trade, Ian Macfarlane, called for a national audit of all gas pipelines, and highlighted the vulnerability of the single pipeline that carries WA's gas from the North West Shelf. Macfarlane said, "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 especially in the south-western part of Western Australia." Professor Dong-ke Zhang, Director of the Centre for Petroleum, Fuels and Energy at the University of Western Australia, said, "I would have thought it was quite silly for a very advanced state like WA that we are not able to cope with an incident like this by not having the ability to divert gas from an LNG plant to the domestic pipeline. At a policy level, the infrastructure needs to be longer term and the Government should encourage major players like Woodside and Chevron to invest in the infrastructure and give the incentives for the industry to come to the party because they get much bigger margins by selling LNG overseas."
Restoration of supply.
A statement released by Apache Energy on 13 June 2008 said the company had sourced pipe and valves needed to repair