FREQUENTLY ASKED QUESTIONS
(Disclaimer: These FAQs have been prepared as a public service for the purpose of providing information about the Varanus Island gas disruption and its impacts. The information is made available in good faith and was supplied by industry or was the best available to the Office of Energy in the fourth week of July 2008.)
1. Why is there an energy shortage?
On 3 June a rupture in a pipe at Apache Energy’s facility on Varanus Island in the State’s north-west led to an explosion that damaged one pipeline and two gas processing plants. This has resulted in a loss of about 350 terajoules (TJ) per day or about 30 per cent of the State’s gas supply.
2. What is being done?
Apache Energy has approximately 200 people working on Varanus Island conducting cleanup and reconstruction operations at any one time. Apache Energy has announced that it expects to be in production at about 2/3 normal capacity (200TJ/day) by 15 August and be at full production at the end of December. Gas and electricity producers are helping to make up the Apache Energy gas shortfall. The North West Shelf Joint Venturers’ have increased production. Additional gas is also being extracted from the Mondarra gas storage facility near Dongara. Some power stations and other commercial users of gas have switched to diesel, which has reduced gas requirements. Repair and planned maintenance presently underway on power stations is being expedited. This will mean more power can be produced from coal and higher efficiency gas power stations. Three of the State’s coal-burning power stations are being returned to service. The largest, Collie was brought back on line on 16 July after undergoing repairs. In the meantime all gas and electricity users – commercial and domestic – are urged to cut energy use as much as possible. The current shortfall of energy is approximately 50 to 100 TJ per day depending upon circumstances. For the latest Information The Office of Energy releases a Latest Energy Update (updated daily at 4PM WST) at http://www.energy.wa.gov.au
3. How long before the gas will be back?
Apache expects that repairs to its Varanus Island facility will restore about 200 TJ of gas by August 15. With the additional gas from the North West Shelf and Mondarra, the shortfall of gas will be much reduced. Total restoration is expected by the end of December. It is expected that the contribution from the additional gas supplies will decrease as temperatures rise towards the end of the year. The increasing availability of coal fired generators as maintenance is completed will assist in this regard. However, the additional energy being supplied is likely to cost significantly more than under normal arrangements and may not be as secure. Consequently, the disruption will continue to need careful management until normal supplies are resumed.
4. Why are some businesses affected by the gas shortage and others aren’t?
Businesses that are affected are those supplied by Apache Energy with gas from its Varanus Island facility. About 2/3 of gas supplies to industry come from other sources and these remain unaffected. Many large industrial gas users are affected, as is Alinta which supplies many business and residential customers. Some businesses must use gas in their processes and these are the ones most affected. The most affected are those with commercial arrangements with suppliers that use Varanus Island gas. Businesses that use electricity may also be affected. The most affected are those with commercial arrangements with suppliers that use Varanus Island gas to generate electricity.
5. Why is residential distribution of gas protected? How is it decided which industries get gas?
Essential residential gas supplies are protected for reasons of health and safety of the community. There is a safety concern if the pressure in the residential distribution system drops too far and air infiltrates. In a situation of limited energy (gas and electricity) supply, the following principles guide the priority allocation: 1. protect the health, safety and property of the community; 2. minimise broad community disruption; and 3. minimise economic impact. To ensure that the allocation of limited energy supply is consistent with all these principles, the following priority schedule applies: 1. Energy Infrastructure - this is given top priority in order to maintain the State’s capability to supply gas and electricity to users. 2. Essential Services - these have the potential to seriously impact on the health and safety of the community and include essential public transport and communications. 3. Essential Supply to Residential Customers – this will minimise the potential for health impacts and disruption to the community. At the same time, consumers are being encouraged to reduce energy consumption. 4. Industries providing essential goods and services to the WA community – This will have a higher priority in the allocation of energy than those that do not in order to minimise disruption to the community and recognise the important services that these industries provide. 5. For all other industries, every effort will be made to maximise the availability of supply, recognising their importance to the State and National economy.
6. Why don’t we divert liquefied natural gas (LNG) from our export markets?
The North West Shelf is already producing additional gas and is currently running its domestic gas processing plant at full capacity to inject natural gas into the Dampier to Bunbury Natural Gas Pipeline. Liquefied Natural Gas (LNG) can not be diverted to any ports in Western Australia as we have no appropriate LNG receival, storage, re-gasification and injection facilities in the State. To provide such facilities would be prohibitively expensive for the very few times it might be used, and is likely that gas sourced in such fashion would also be very expensive.
7. I am hearing that gas and electricity prices are going up as a result of the energy shortage. Is that true?
Gas and electricity prices charged by energy retailers to large commercial users are not capped and normal market forces apply. Some power stations have switched to diesel, which is more expensive than currently contracted gas. This mostly affects customers seeking to purchase short term or “spot” gas or electricity because their normal supply is unavailable. Residential customers are protected as their prices are capped and regulated.
8. Sometimes when there is a limited supply of something people take advantage of the situation and charge excessive prices. Is that happening?
Price increases to affected commercial gas and electricity users seeking an alternative supply source are to be expected due to the high cost of gas alternatives such as diesel. If a business can free up gas by using diesel they need to be compensated for the additional cost of diesel and the price of gas released needs to reflect the higher cost of diesel. Otherwise businesses that can use diesel instead of gas would lose large sums of money and would not be encouraged to release their gas into the market for other users. To assist businesses who can free up gas (by reducing their gas consumption or using an alternative fuel) for those businesses who need it the most, the Office of Energy has contracted the Independent Market Operator to run a gas bulletin board which can match buyers and sellers of gas.
9. Why can’t we just ration gas in homes to give more gas to business?
The Government’s role until normal gas supplies are restored is to protect the health, safety and property of the community, while minimising community disruption and economic impact. Based on these principles, the main priority for gas supplies is to protect essential energy infrastructure, followed by essential services such as hospitals and public transport, essential residential supplies, industries providing essential goods and services, all of which are currently receiving essential energy needs, and finally industry. (See answer 5 above)
10. What are emergency orders and when are they used?
Emergency orders involve the State taking control of energy supplies; however, the situation currently is not a crisis that requires the use of emergency orders. There is currently more than enough supply to meet essential services.
11. Why can’t we build back up facilities in case of a disaster?
Building and maintaining facilities to provide complete back-up of our energy supplies would be prohibitively expensive for the very few times they might be used.
12. Why didn’t the State Government inspect facilities on Varanus Island more frequently to avoid the disruptions?
Varanus Island is an offshore island and is inspected by the Federal National Offshore Petroleum Safety Authority. The facilities at Varanus Island have been inspected 6 times since 2005, 3 times in the last 12 months and were last inspected in March 2008.
13. What is the State Government doing to ensure the security of our energy supplies in the longer term?
The State Government through a range of policies is encouraging diversity and security of competitive energy sources and types. For example: The State Government has a Domestic Gas Reservation Policy that requires all gas exporters to reserve 15% of the gas for domestic purposes. The State Government has created an independently operated and controlled open and free market for electricity which has enabled private enterprise to build new competitive coal, gas and wind power stations. A key requirement of the market is that sellers of electricity must secure extra spare capacity that can be used in unusually high peak periods and emergencies. In addition, the Commonwealth Government encourages growth in the use of renewable sources of energy by compelling all sellers of electricity to have to have a proportion of their electricity from renewable sources. The State Government has a policy of encouraging development of tight gas deposits close to Perth. These deposits could provide valuable additional energy security but special engineering is needed to overcome present technical difficulties with extraction. Alcoa has announced a joint venture to develop the Warro tight gas deposit near Gingin. A similar development is expected with the Whitcher Range deposit near Busselton. Estimated tight gas resources close to Perth are equivalent to 30 years gas supply for Perth and the SW of the State at current consumption levels.
14. Why are we bringing back coal-fired power stations when it is a gas shortage?
Repair and planned maintenance presently underway on power stations is being expedited. This will mean more electricity can be generated using coal and higher efficiency gas fired power stations and would free up gas for other users. Three of the State’s retired coal-fired power generation units at Muja A&B (near Collie) are also being returned to service. This is only a short-term solution until gas supplies are fully restored and stabilised. Modern and efficient coal fired power stations will continue to be part of WA’s energy mix. The gas disruption has highlighted the importance of coal to the State’s energy security.
15. Why were coal fired power stations off-line during the gas disruption?
Verve Energy’s largest coal fired power station (Collie) is under repair due to damage. All coal fired power stations are shut down in an orderly sequence during winter for planned and necessary maintenance. This is to avoid a failure of a coal fired power station during summer when demand for electricity is greatest.
16. Why are people talking about diesel when it is a gas shortage?
Diesel can be used as an alternative fuel in some gas fired power stations. The State’s energy utilities and some industrial gas users have the option to burn diesel, which reduces overall gas requirements. However diesel is much more expensive than gas, and is only a short term option until gas supplies are fully restored.
17. What will be the effect on liquid fuel supplies such as petrol and diesel?
Petrol supplies should not be affected by the gas shortage. Normal diesel supplies should also not be affected.
18. How can I best help in the situation?
The State Government is sending a strong message to all consumers of gas and electricity – domestic and commercial – to reduce use as much as possible. Although most of the gas used in WA is used by large industrial users there are about 565,000 residential and 50,000 small business users in the South-West. Residential and small business gas consumption is a smaller but significant proportion of gas delivered to the South-West, and in colder weather residential consumption of gas increases considerably. Reducing household energy consumption can make gas available for use by business. This has the potential to make a difference to those workers and businesses affected by the gas disruption. For more information on energy efficiency please call the Energy Smart line on phone: 1300 658 158 or visit the Sustainable Energy Development Office (SEDO) web site on http://www.sedo.energy.wa.gov.au/pages/simple.asp
19. Who do I call/visit for help if my small business is impacted by the energy shortage?
You should call the Small Business Development Corporation Advice Line on - 1800 199 125.
20. Who do I call/visit for help if I am stood down, forced to take vacation, or laid off?
If you fall under Federal jurisdiction you should call the Workplace Infoline on 1300 363 264 for advice. If you fall under the State jurisdiction you should call the Department of Employment Protection (DOCEP) Wageline on 1300 655 266.
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