From Australia (LB): The Western Australian government has signed a Key Principles Agreement with the proponents of the Browse (SEN 32/5) flng project for the provision of domestic gas and to locate a supply chain in Western Australia.

It is the first time that the state’s domestic gas reservation policy would be applied to an flng project, and while Premier and State Development Minister Colin Barnett said the agreement would deliver benefits to the state in terms of domestic gas and opportunities for local businesses and workers, some industry leaders lamented the idea of imposing additional cost and complexity to lng projects in Australia.

According to the government, the agreement is expected to raise more than $1bn in royalties over the life of the project.

Under the agreement, the Browse Joint Venture partners, including operator Woodside Petroleum, Shell, BP, Japan Australia LNG and PetroChina, have committed to reserve gas equivalent to 15% of production from the state’s share of the Torosa reservoir, one of three gas fields that make up the project.

‘The domestic gas obligation will coincide with first production from Torosa and amount to around 800 petajoules over the life of the project, helping to secure the state’s energy future,’ Barnett said.

In addition, the Browse Joint Venture has committed to the development of an integrated supply chain in Western Australia to provide port, marine, aviation, storage and transport services over the life of the project.

APPEA Western Region Chief Operating Officer Stedman Ellis said the decision to force projects to reserve gas for the state’s domestic market amounted to a de facto tax.

‘In what is now a new investment climate, the government should be looking to reduce the cost and regulatory burden on LNG projects if it wants to attract investment,’ Ellis said.

‘Instead, it continues to do the very opposite by imposing a gas reservation policy that simultaneously acts as a tax on gas production and a subsidy on gas consumption.’

Meanwhile, Woodside said it had received retention lease renewal offers for petroleum retention leases WA-28-R, WA-29-R, WA-30-R, WA-31-R, WA-32-R, TR/5 and R2, from the Commonwealth-Western Australia Offshore Petroleum Joint Authority and the WA Minister for Mines and Petroleum.

The company has 30 days to accept the retention lease renewal offers.