Western Australia (WA) is experiencing a growing dependency on natural gas, standing out as the only state in Australia to increase its gas use since the fiscal year 2020. A recent report from IEEFA Australia highlighted not only WA's role as Australias gas consumption leader but also the potential for new technologies and renewable energy to significantly decrease this reliance and yield substantial benefits for its industries.
According to the report, presented on March 13, 2025, WA's gas demand is predominantly driven by four industrial sectors: liquefied natural gas (LNG) processing, electricity generation, alumina refining, and ammonia production. Specifically, 84% of WA's gas usage is split as follows: 36% for LNG processing, 24% for electricity generation, 17% for alumina refining, and 7% for ammonia production. This dependency is projected to increase, with the Australian Energy Market Operator (AEMO) estimating up to 19% growth by 2034, excluding LNG processing.
Amandine Denis-Ryan, CEO of IEEFA Australia, co-authored the report. She stated, “The expected increase in WA gas consumption risks locking in higher gas dependency just as supply constraints emerge,” illustrating the precarious position WA is placing itself in as the energy market evolves. The report warns of possible price rises due to anticipated demand growth paralleled with tightening supply, which could negatively impact gas-intensive industries.
The report identifies electric turbines as effective alternatives to gas liquefaction. Capable of reducing emissions by up to 90%, these turbines can offer increased productivity and lowered maintenance costs. Denis-Ryan noted, “Despite these benefits and technological maturity, there are no announced plans to deploy electric turbines in Australia’s LNG plants.”
Further optimism exists for the ammonia production sector. The report indicates ammonia could transition to include 30% green hydrogen within its production processes without major equipment upgrades. Implementing a requirement for 30% of explosives used by miners to be made from green hydrogen by 2035 could marginally increase operational costs for miners by just 0.2%, making it financially viable and environmentally beneficial.
Alumina refining is also highlighted as another sector where electrification could thrive. The report suggests the use of mechanical vapor recompression, which could potentially electrify 70% of the gas currently consumed by alumina production. This technology could be instrumental, as it takes 1GJ of electricity to replace 5GJ of gas, making it not only promising but potentially financially attractive.
Interestingly, WA's approach to electricity generation sees more gas employed than is used across the entire rest of Australia combined—and this trend has developed particularly strongly within remote regions. Consequently, Denis-Ryan emphasizes, “WA’s transition to renewables has been slower than the rest of the country, with very little progress made, especially in WA’s north-west.” She noted this situation conflicts with WA’s excellent renewable resources, which include great opportunities for solar and wind energy.
On the international stage, WA's future reliance on gas could jeopardize its competitive edge, particularly as global markets pivot toward greener energy solutions, including green iron and steel production. The report highlights the global shift away from gas-driven production processes, with countries seeking greener methods to stake their claim on the burgeoning green iron and steel market.
Alongside WA's economic pressures, the gas market is forecast to become increasingly competitive for Australian exporters as well. JERA, the biggest gas buyer from Australia, has warned of tougher times as new projects from Qatar and the US emerge. Speaking on March 11, 2025, at the WA government-sponsored Energy Exchange oil and gas conference, JERA's senior vice president for LNG, Hitoshi Nishizawa, said the company anticipates needing to negotiate lower prices for Australian LNG once existing contracts expire, starting as early as 2033.
JERA, which handles approximately 35 million tonnes of LNG annually, relies heavily on Australian sources for its supply. With 40% of its LNG sourced from Australia, the urgency to renegotiate contracts with firms like INPEX for the Ichthys project and Chevron's Wheatstone could pressure Australian suppliers toward more favorable terms due to increased competition.
The JERA executive pointed out, “Some key contracts for Australian LNG will end around the same time the cheaper supplies of gas are due to come to the market,” confirming the challenges Australian gas suppliers could face amid this shifting competitive dynamic.
While the industry faces downward price pressure, Nishizawa outlined the demand for more flexible contractual terms, allowing JERA more options on how it might utilize its LNG purchases. This shift aligns with Japan's recent trend of gas buyers becoming traders, with the proportion of resold LNG increasing from 16% five years ago to 37% of total purchases as of the 2023 fiscal year.
Despite the challenges this sector is facing, major players like Shell forecast demand for LNG will see significant growth, potentially surging 60% by 2040. Nevertheless, the ability to balance cheaper costs with the capital investments needed for production remains uncertain, especially against the backdrop of recent regulatory changes and Australian commitments toward emission reductions.
The end of major contract entitlements coupled with the shifting regulatory framework could alter perceptions of reliability concerning Australian LNG. Nishizawa remarked on JERA’s growing concerns over Australian investment stability, stating, “It was no secret Japanese confidence in Australia was shaken by the retrospective application of the safeguard mechanism.” This sentiment underlines the need for the Australian gas sector to adapt to both domestic and international pressures, as competition and demand patterns continue to evolve.
With both state and international pressures mounting, the future for gas dependency and usage is under scrutiny. While WA continues to explore its resource potential, the willingness to embrace renewable technologies could define not only its industrial future but also its competitiveness on the global stage.