WA Gas Policy update and what it means for your corporate development strategy

What’s the gas?

Western Australia’s Cook Government has introduced a significant update to its domestic gas policy. It now allows up to 20% of gas production from new onshore projects to be exported as LNG until December 31, 2030. This policy is a game-changer, particularly for companies with projects on the verge of development.

By opening the door to lucrative LNG markets, it offers a way to capture higher prices, provided these companies can get their projects up and running in time. Existing operations, such as the Waitsia project, will continue under their current obligations, but there’s potential for others to tap into shared infrastructure and unlock new revenue streams.

So What?

This shift is more than just a policy adjustment—it’s a strategic recalibration that could reshape the state’s energy landscape. By allowing a portion of new gas production to be sold internationally, the government is providing an incentive for accelerated development of untapped resources. The policy could spur a wave of new investments as companies move quickly to take advantage of the higher margins LNG exports can offer compared to the domestic market. But this opportunity is not without its complications.

The focus on new projects means established operations might not see the same benefits, creating a potential split in how the industry evolves over the next decade.

However, there’s still a risk of domestic price impact. A greater shift to LNG (which the Cook Government supports) could tighten local supply, potentially driving up prices for domestic consumers and industries. Additionally, the definition of a “new project” and how infrastructure sharing will work needs clarity. And at the risk of stating the obvious, the policy is currently set to expire in 2030, which might cause a rush of projects aiming to exploit the export window, potentially leading to boom-bust cycles where investment and production again drop if no further policy support is offered.

Where to Now?

Well, the clock is ticking for gas producers. Those with undeveloped assets need to fast-track their projects to benefit from the export window before it closes in 2030. This is a critical moment to secure partnerships, finalise development plans, and perhaps most importantly, navigate the complexities of infrastructure sharing and financing arrangements in a less-than-ideal financing environment.

The government’s stance on shared use of existing facilities could be a make-or-break factor for smaller players looking to leverage established pathways to market, without the hefty costs of building new processing capacity. We’ve seen this in other industries—with a bifurcation of big first movers and smaller followers.

Implications for Corporate Development Strategies

For energy companies, the new policy could provide both a launchpad and a potential hazard. On the one hand, there’s a clear opportunity to lock in higher returns from new projects and fuel strategic growth.

For businesses with onshore gas assets, you probably need to reassess your portfolio and development timelines to ensure you don’t miss this window of opportunity. But it’s a double-edged sword because greater LNG exports could squeeze domestic supply, driving up prices and impacting local industries reliant on stable, affordable gas. Vertical integration could also be a strategy to control more of the supply chain and mitigate exposure, and no doubt those wheels have been set in motion. Additionally, aligning with infrastructure-sharing deals will be crucial. If you are in a position to streamline your operations and tap into existing processing capacities, your business will be better positioned to ride these tailwinds without the need for significant new investments.
For domestic businesses reliant on secure long-term supplies of affordable gas, this is potentially more of a headwind than a tailwind for you. To navigate this, perhaps consider a mix of hedging against potential price volatility, securing long-term contracts to safeguard your energy costs, or joining with others to improve access or pricing (and on that, have a look at what energy cost-driven crypto miners have been doing in the U.S.).

In short, the updated WA gas policy for (new) onshore gas is more than just a policy shift—it’s a catalyst for change for companies that can adapt quickly and capitalise on these tailwinds to drive growth. But they’ll need to remain vigilant to protect against the turbulence that’s likely to follow, and domestic gas buyers will need to put the appropriate risk minimisation strategies in place, either organically or through contractual/inorganic combinations.

Finally, quoted companies looking to capitalise on developments might perversely see some downwards pressure on share price—as equity investors factor in those inevitable equity requirements.

Curious how the WA Gas Policy could impact your strategy? Let’s grab ☕🥐 to explore what this means for your business and growth strategy.

See you in the market,

Mike

Michael GanonSeptember 23, 2024#money, #management, #markets, #investing, #technology, #india, #future, #finance, #executivesandmanagement, #businessintelligence, #fundraising. #strategy, #managementconsulting, #business, #wealthmanagement, #sustainability, #venturecapital, #investmentbanking, #entrepreneurship, #economy, #gold, #silver, #bitcoin, #corporatedev #corporatedevelopment #miningandconstruction, #strategy, #commodities, #corporatefinance, #equities, #stocks, #bonds, #economics, #macroeconomics, #ethereum, #inflation, #qeinfinity, #interestrates, #trade, #transformation, #ceos, #directors, #founders, #cfos, #currencies, #construction, #mining, #renewables, #leadership, #china, #australia, #education, #research, #businessowners, #brexit, #community, #covid, #populism, #crypto, #successionplanning, #familyoffices, #uranium, #copper, #nickel, #Fed, #federalreserve, #monetarypolicy, #centralbanks, #marketoutlook, #financialmarkets, #stockmarket, #valuation, #SP500, #realestate, #foreignexchange, #humanresources, #productivity, #continuingeducation, #financialanalysis, #CPA, #CFP, #CFA