Petroleum industry in Western Australia
The petroleum industry in Western Australia is the largest contributor to Australia's production of most petroleum products.
Based largely on development of the reserves of the North West Shelf and other onshore hydrocarbon basins, the industry extracts crude oil, condensate and natural gas from petroleum reservoirs deep beneath the Earth's surface. A large plant located at Withnell Bay near Dampier, produces liquefied natural gas for export to Asian customers. Crude oil and most petroleum liquids are exported, and Australia's largest petroleum refinery at Kwinana in WA's south-west, produces petrol and diesel for local consumption. Natural gas is processed at plants located on islands off the WA coast and onshore, then transported by pipelines to gas users throughout the state.
In 2007, the industry produced of crude oil/condensate, and 30 billion cubic metres of gas. 65% of the gas was transformed into 12 million tonnes of LNG, with the remainder of the gas being sold to users in Western Australia. Primary production by the industry was valued at $16.7 billion, accounting for 31% of all natural resources produced in the state.
Early history
The earliest petroleum-related activity in the state was in 1902, with the first oil exploration well drilled near the Warren River area in the southwest. Traces of oil were found in a bore near Fitzroy Crossing in 1919. Formal exploration in Western Australia started in 1946, when the Australian Motorists Petrol Company commenced an exploration programme, using the services of the Bureau of Mineral Resources which had been set up by the Australian government in the same year to conduct survey work. In the following year, AMPOL were awarded the first two exploration permits in Western Australia near Exmouth.Large-scale surveys were conducted in the Canning Basin in 1947, and in the same year, Ampol secured exploration permits for the Exmouth region. Ampol formed a joint venture with Standard Oil of California. The new company was called West Australian Petroleum, and drilled its first well at Rough Range in 1953. This well produced at a rate of, and was probably the commencement of Australia's commercial petroleum industry. In the following year, WAPET geologists conducted a basic survey of Barrow Island. They were the first civilians to visit the area since British atomic testing on the nearby Monte Bello Islands. The company achieved major commercial success with a large discovery on the island in 1964, which was followed by a large scale operation which continues to this day.
In 1966, WAPET discovered WA's first commercial quantities of natural gas near Dongara. Construction of the state's first gas pipeline was completed in 1971. The pipeline transported gas from Dongara to Perth, Kwinana and Pinjarra. Originally known as the WANG Pipeline, it is still in operation and now known as the Parmelia Pipeline. Woodside received its first permits to explore the Carnarvon basin in 1963. The 1971 gas/condensate discoveries by the BOCAL consortium at Scott Reef, North Rankin and Goodwyn were followed by a further gas/condensate discovery at Angel in 1972.
Geology
Five of the seven major sedimentary basins in Western Australia have known hydrocarbon accumulations,with 2007–08 production coming from the Carnarvon, Perth, Bonaparte and Canning basins. Sixty-one fields were on production during 2007–08 fiscal year. Petroleum in Western Australia is mostly sourced from the Carnarvon Basin, which stretches for 1,000 km of the west and northwest coast, from Geraldton to north of Port Hedland. In area, the onshore part of the Carnarvon Basin covers about 115,000 km² and the offshore part covers approximately 535,000 km² with water depths up to 3,500 m.Less than 5% of the state's gas comes from fields near Dongara, part of the Perth basin, which extends about 1300 km along the southwestern margin of the continent. This is a large basin that formed during the separation of Australia and Greater India in the Permian to Early Cretaceous period. It includes a significant onshore component and extends offshore to the edge of continental crust in water depths of up to 4500 m.
The Officer basin, straddling the WA-SA border in the south-east section of the state, is a poorly explored basin, with limited seismic coverage, although more than 20 exploration wells have been drilled. A small amount of oil is produced in the Canning basin, in which 250 wells have been drilled and 78,000 line-km of 2D seismic surveys has been shot. A local company, Arc Energy, currently the largest Perth basin producer, is actively exploring and drilling in the Canning basin.
Products
LNG
The North West Shelf Venture, a consortium of six energy companies led by Woodside, operates five LNG trains near Karratha. It relies on natural gas supplied from North Rankin, Goodwyn and Perseus fields in the Northwest Shelf. The majority of LNG produced by the NWSV is exported to Japan, with occasional spot sales to the United States, Spain and Korea. A fifth LNG train is currently under construction and is expected to increase export capacity by an additional 4.2 million tons, bringing total capacity to around 16 million tonnes per year. The cost of the project is estimated at $1.6 billion, with startup in late 2008.Although the NWSV dominates Australia's LNG market, additional projects are in various stages of planning, the largest of which is the Gorgon gas project. Chevron is considering development of the Greater Gorgon gas fields, which contain recoverable reserves of. The project entails constructing subsea pipelines from the Gorgon and Jansz fields to Australia's Barrow Island, where 3 liquefaction trains will produce 15 million tons of LNG per year.
Domestic gas
In 2006-07, around two thirds of Australia's natural gas was produced in the Carnarvon Basin off the coast of Western Australia. Most of the gas produced in WA is transformed into liquefied natural gas and exported to Japan. The remainder is used within the state. The domestic market for natural gas in WA, like that of Australia as a whole, is characterised by a small number of producers and a small number of large industrial consumers, with limited depth in consumption.The state's two largest individual users of gas are Alcoa and Burrup Fertilisers. Together they account for more than half of the natural gas consumed in WA. Most of the remaining gas is used for electricity generation and by other smaller industrial and commercial users. Residential gas users consume only about 2% of the natural gas produced in the state.
There are three main 'supply lines' for WA's domestic gas:
- 65% From the North-West Shelf domestic gas plant near Dampier, operated by Woodside Petroleum, transporting gas via the Dampier to Bunbury Natural gas Pipeline ;
- 30% From the Varanus Island facility operated by Apache Energy on behalf of a number of production joint ventures. Output from the Varanus Island plant is divided between mineral processing operations who receive their gas via the Goldfields Gas Pipeline, and industrial and commercial customers in Perth and the southwest who receive their supplies via the DBNGP which links with the Varanus Island trunk line about 130 km south of Dampier; and
- 5% From small gas producers near Dongara, transported via the Parmelia Pipeline.
Petroleum liquids (Crude oil, condensate and LPG)
Western Australia is Australia's leading oil producing State, having surpassed Victoria, where production from the Gippsland Basin off the southern coast has been steadily declining. Western Australia currently produces 71% of Australia's crude oil and condensate. Australian crude oil and condensate production is projected to increase in the medium term before declining gradually.
Sector organisation
Similar to petroleum industries in other market-capitalist economies such as those in Western Europe and North America, the structure of the WA petroleum industry is characterised by the involvement of private corporations, with an important regulatory role occupied by the federal and state governments in most aspects of the industry. Australian companies operating in the industry include Woodside Petroleum, Santos and BHP Billiton. Foreign-owned companies involved in the state include Apache Energy, BP, Chevron, ExxonMobil, Shell, Inpex and ConocoPhillips.Government
Government involvement in the industry covers areas such as policy development, safety and environmental regulation, investment facilitation, provision of infrastructure, releases of new exploration areas, acquisition of regional geological data. The legal framework within which petroleum exploration and development occurs is a result of the division of responsibilities between the Commonwealth and the states/territories under the Constitution and inter-governmental agreements.Onshore, and out to 3 nm from the territorial sea baseline, petroleum operations are the responsibility of the state government. WA's offshore areas beyond the 3 nm limit are governed by Commonwealth legislation administered by the Department of Innovation, Industry, Science and Research. The Law of the Sea Convention gives effect to a system of Exclusive Economic Zones under which nations have sovereign rights over natural resources out to 200 nm from the coast. The convention also allows Australia to claim sovereign rights over seabed resources where the continental shelf extends beyond 200 nm. State agencies also administer some aspects of federal petroleum-related legislation on behalf of the Commonwealth.
| Department / agency | Role |
| Department of Innovation, Industry, Science and Research | Advice and policy support regarding resources and energy |
| National Offshore Petroleum Safety Authority | Administers offshore petroleum safety legislation |
| Foreign Investment Review Board | Approval of foreign investments >$100 m |
| Geoscience Australia | Research and advice to government and industry on petroleum prospects, reserves and potential |
| Department of the Environment, Water, Heritage and the Arts | Project assessment and approvals under the Environment Protection and Biodiversity Conservation Act 1999 |
| Department / agency | Role |
| Department of Mines and Petroleum | Main state agency; facilitates state economic development and growth; exploration leases, production and pipeline licences |
| Economic Regulation Authority | Regulates monopoly aspects of the petroleum industry |
| Environmental Protection Authority | Advice to the Env. Minister; preparation of environmental protection policies; assessment of proposals and management plans |
| Office of Energy | Regulatory policy and structures for energy infrastructure |
Production facilities
Production refers to the process of extracting the hydrocarbons from existing wells, along with initial separation of the wellstream components, prior to transportation to end-use markets or further processing and refining. Most of the state's petroleum production occurs at offshore production platforms, although many wells are situated on the mainland and on several islands off the coast such as Thevenard Island and at Barrow Island where commercial oil production in WA commenced in 1964. WA's largest production platforms are North Rankin A and Goodwyn A - both operated by Woodside Petroleum - located approximately 130 km west of Dampier, where the ocean depth is about 100 m.Transportation
There are currently four major natural gas transmission pipelines supplying the Western Australian gas market:- Dampier to Bunbury Natural Gas Pipeline, which transports gas from the North West Shelf area to customers in the Geraldton, Perth, Mandurah and Bunbury areas;
- Goldfields Gas Pipeline, taking gas from Varanus Island to the Goldfields;
- Parmelia Pipeline, taking gas from various fields in the Perth Basin to customers in the State's South West; and
- Pilbara Energy Pipeline - from Dampier to Port Hedland.
Refining
The quantity of Perth basin oil production rose substantially in 2001 when the Cliff Head field was brought into production., about 320 km north of Perth. The refinery mostly produces petrol and diesel, along with jet fuel, bitumen and liquid petroleum gas. Australia's refineries have experienced declining gross margins for several years, mainly due to competition from foreign refineries, an oversupply of refining capacity in Asia, and the high cost of transporting crude oil to Australia.
Issues
Supply disruption
The state's heavy reliance on gas from the north west has become a prominent public issue on several occasions when disruptions to supply has occurred. On 18 February 2004, Western Power imposed compulsory restrictions on power usage in Perth. This occurred on a day when the temperature was expected to reach nearly 42 °C and the company was unable to use its 'peakload' gas-fired power stations because of maintenance being carried out on the main pipeline from the north-west.On 2 January 2008, an electrical fault resulted in a production shutdown at the North West Shelf Venture's Karratha Gas Plant. Production resumed on 4 January and normal gas supplies was re-established by 6 January 2008. It was a complete shutdown affecting both LNG exports and domestic gas production. Domestic gas supplies were cut by 2/3.
The most serious and significant disruption occurred in June 2008, when a pipeline rupture and explosion at the Varanus Island facility caused a 3-month shutdown of the plant, reducing the state's supply of natural gas by one-third.