2008 Western Australian Gas Crisis
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The Western Australian gas crisis was a major disruption to
natural gas Natural gas (also called fossil gas or simply gas) is a naturally occurring mixture of gaseous hydrocarbons consisting primarily of methane in addition to various smaller amounts of other higher alkanes. Low levels of trace gases like carbo ...
supply in
Western Australia Western Australia (commonly abbreviated as WA) is a state of Australia occupying the western percent of the land area of Australia excluding external territories. It is bounded by the Indian Ocean to the north and west, the Southern Ocean to th ...
, caused by the rupture of a
corroded Corroded is a heavy metal band from Ånge, Sweden. The band is best known for their song ''Time And Again'', which was the theme song for the Swedish 2009 ''Survivor'' television series on TV4. The band's second album ''Exit to Transfer'', rele ...
pipeline Pipeline may refer to: Electronics, computers and computing * Pipeline (computing), a chain of data-processing stages or a CPU optimization found on ** Instruction pipelining, a technique for implementing instruction-level parallelism within a s ...
and subsequent explosion at a processing plant on
Varanus Island Varanus Island is the largest of the Lowendal Islands, an archipelago off the north west coast of Western Australia, near Karratha in the Pilbara region. The island is approximately from the mainland coast. It is located at .Gazetteer of Austral ...
, off the state's
north west The points of the compass are a set of horizontal, radially arrayed compass directions (or azimuths) used in navigation and cartography. A compass rose is primarily composed of four cardinal directions—north, east, south, and west—each sepa ...
coast on 3 June 2008. The plant, operated by
Apache Energy The Apache () are a group of culturally related Native American tribes in the Southwestern United States, which include the Chiricahua, Jicarilla, Lipan, Mescalero, Mimbreño, Ndendahe (Bedonkohe or Mogollon and Nednhi or Carrizaleño an ...
, which normally supplied a third of the state's gas, was shut down for almost two months while a detailed engineering investigation and major repairs were carried out. Gas supply from the plant partially resumed in late August. By mid-October, gas production was running at two-thirds of normal capacity, with 85% of full output restored by December 2008. In a state heavily reliant on continuous supply of gas for industrial processing, manufacturing, residential use and electricity generation, the sudden loss of almost 35% of gas supply had immediate social impacts, and significant short and long-term economic effects. Many businesses were forced to curtail or cease operations, resulting in workers being stood down or forced to take
annual leave Annual leave is a period of paid time off work granted by employers to employees to be used for whatever the employee wishes. Depending on the employer's policies, differing number of days may be offered, and the employee may be required to gi ...
, and the government requested that businesses and householders conserve energy usage. An emergency coordination committee of government and industry representatives rationed and redirected remaining gas supply sources. When many large gas users switched to diesel for power generation, the risk of a shortfall in transport fuel led to the federal government authorising the release of emergency fuel reserves stored at the Garden Island naval facility. The incident raised significant public and political issues related to energy security, adequacy of existing infrastructure, contingency planning, and the role of regulatory agencies. The plant took three months to repair, although partial supplies were restored within six weeks of the explosion. A major investigation was launched by the
National Offshore Petroleum Safety Authority The National Offshore Petroleum Safety and Environmental Management Authority (NOPSEMA) is the Australian Government offshore energy regulator responsible for the health and safety, well integrity and environmental management aspects of offshore ...
(NOPSA), with separate investigations conducted by the plant operator and several other government agencies. NOPSA's report was published on 10 October 2008, and confirmed early suggestions that the explosion was caused by structural failure of the export pipeline due to significant corrosion. A
Senate A senate is a deliberative assembly, often the upper house or chamber of a bicameral legislature. The name comes from the ancient Roman Senate (Latin: ''Senatus''), so-called as an assembly of the senior (Latin: ''senex'' meaning "the el ...
Committee inquiry was established to investigate the economic impacts and the state government's response to the crisis. The committee's report was handed down on 3 December 2008.


Background

Since 1996,
Varanus Island Varanus Island is the largest of the Lowendal Islands, an archipelago off the north west coast of Western Australia, near Karratha in the Pilbara region. The island is approximately from the mainland coast. It is located at .Gazetteer of Austral ...
, from the Western Australian coast, has operated as a hub for oil,
condensate Condensate may refer to: * The liquid phase produced by the condensation of steam or any other gas * The product of a chemical condensation reaction, other than water * Natural-gas condensate, in the natural gas industry * ''Condensate'' (album) ...
and gas gathering infrastructure belonging to several petroleum
joint ventures A joint venture (JV) is a business entity created by two or more parties, generally characterized by shared ownership, shared returns and risks, and shared governance. Companies typically pursue joint ventures for one of four reasons: to acces ...
, including Harriet JV and John Brookes JV. The island's facilities include large tanks where condensate is stored prior to being offloaded onto
tankers Tanker may refer to: Transportation * Tanker, a tank crewman (US) * Tanker (ship), a ship designed to carry bulk liquids ** Chemical tanker, a type of tanker designed to transport chemicals in bulk ** Oil tanker, also known as a petroleum tanke ...
, and five gas plants. Condensate, water and other impurities are removed from the gas arriving from the offshore platforms connected to the island. Most of the carbon dioxide is removed so the gas can meet the specifications of the onshore pipelines and end users. Gas from the plant is sent via two
subsea Subsea technology involves fully submerged ocean equipment, operations, or applications, especially when some distance offshore, in deep ocean waters, or on the seabed. The term ''subsea'' is frequently used in connection with oceanography, marin ...
pipelines to the mainland, where the pipelines connect to the Goldfields Gas Pipeline and the Dampier to Bunbury Natural Gas Pipeline. Before the incident, the plant produced 365 terajoules of gas per day for the state market. The gas plant is licensed under the WA Petroleum Pipelines Act 1969. Safety and health regulation under this Act is the responsibility of the Department of Mines and Petroleum (DMP), which engaged
National Offshore Petroleum Safety Authority The National Offshore Petroleum Safety and Environmental Management Authority (NOPSEMA) is the Australian Government offshore energy regulator responsible for the health and safety, well integrity and environmental management aspects of offshore ...
(NOPSA) to provide inspections and reporting.


Incident

At 1:40pm on Tuesday 3 June 2008, an export gas pipeline ruptured near the gas plant, causing a fire in a large section of the plant. No one was injured and all employees on the island were moved to a safety point within 20 minutes of the explosion. One hundred and fifty-three staff were evacuated later that day, with 13 staff staying on the island to monitor the situation. Chief Executive Officer G. Steven Farris said, "Our priorities are the safety of our personnel, securing the facilities, assuring that the environmental impact is limited to the island and resuming throughput of oil and gas production...No-one was injured, all personnel are safe, and the rupture and fire appear to be contained on the island." The explosion and resulting fire caused a full plant shutdown, reducing Western Australia's supply of energy by up to 35%. Apache's managing director, Tim Wall, said, "It's pretty easy to say there is a lot of damage here and we are looking at alternatives to try to get gas to market as soon as possible but it will be at least several months before we have partial sales." He estimated it would be at least three months until the plant was at least partially operational, when the less-damaged processing plants for John Brookes and East Spar are brought back online. The John Brookes and East Spar plants produce 150-200
terajoules The joule ( , ; symbol: J) is the unit of energy in the International System of Units (SI). It is equal to the amount of work done when a force of 1 newton displaces a mass through a distance of 1 metre in the direction of the force applied. ...
of gas daily, compared to 370 terajoules when all plants, including the significantly damaged Harriet plant, were fully operational. Approximately 80-90% of the island's gas is used by industrial customers, with small amounts provided to
Synergy Synergy is an interaction or cooperation giving rise to a whole that is greater than the simple sum of its parts. The term ''synergy'' comes from the Attic Greek word συνεργία ' from ', , meaning "working together". History In Christia ...
, the state's largest electricity retailer.


Political response

The explosion was investigated separately by Apache Energy, the National Offshore Petroleum Safety Authority (NOPSA) and other agencies. The WA State Opposition called for a Royal Commission, with Energy Spokesperson John Day saying, "It's a matter of making sure that this major disaster, which is now facing WA, does not happen again". Western Australian
Premier Premier is a title for the head of government in central governments, state governments and local governments of some countries. A second in command to a premier is designated as a deputy premier. A premier will normally be a head of governm ...
Alan Carpenter Alan John Carpenter (born 4 January 1957) is a former Australian politician who served as the 28th Premier of Western Australia, from 2006 to 2008. From Albany, Carpenter graduated from the University of Western Australia, and worked as a journ ...
said this was unnecessary because the National Offshore Petroleum Safety Authority was investigating and it could compromise their inquiry. Carpenter said their investigation will take 10–12 weeks to complete and its findings will be released to the public. State Opposition Leader,
Troy Buswell Troy Raymond Buswell (born 19 March 1966) is a former Australian politician who was a Liberal member of the Western Australian Legislative Assembly from 2005 to 2014, representing the seat of Vasse. He was Treasurer of Western Australia in the ...
, said that NOPSA had a
conflict of interest A conflict of interest (COI) is a situation in which a person or organization is involved in multiple interests, financial or otherwise, and serving one interest could involve working against another. Typically, this relates to situations i ...
as it helped perform safety inspections on the island, and therefore "are conducting an investigation which will in part be an investigation into themselves". Premier Carpenter held a meeting on Sunday 8 June with key stakeholders in WA's gas industry and announced that gas would be sourced from alternative suppliers, and a coal-fired power station, which was shut down for maintenance, would be brought back online. He also asked domestic users to save energy where possible, as the saved energy could be used by industries in need. On 11 June, Carpenter warned he might need to invoke emergency powers and take control of all of WA's gas and electricity supplies, which would result in rolling stoppages, blackouts and brownouts. He also said he had discussed accessing emergency diesel supplies stored by the
Department of Defence Department of Defence or Department of Defense may refer to: Current departments of defence * Department of Defence (Australia) * Department of National Defence (Canada) * Department of Defence (Ireland) * Department of National Defense (Philipp ...
at Garden Island with
Acting Prime Minister An acting prime minister is a cabinet member (often in Westminster system countries) who is serving in the role of prime minister, whilst the individual who normally holds the position is unable to do so. The role is often performed by the deputy ...
Julia Gillard Julia Eileen Gillard (born 29 September 1961) is an Australian former politician who served as the 27th prime minister of Australia from 2010 to 2013, holding office as leader of the Australian Labor Party (ALP). She is the first and only ...
. The state's Energy Minister,
Fran Logan Francis Michael Logan (born 25 February 1956) is a former politician in Western Australia, who was the Minister for Emergency Services and Corrective Services in the McGowan Labor Government from 2017 to 2021, . He was elected to the south west ...
, said the decommissioned Muja AB coal-fired power station at
Collie Collies form a distinctive type of herding dogs, including many related landraces and standardized breeds. The type originated in Scotland and Northern England. Collies are medium-sized, fairly lightly-built dogs, with pointed snouts. Many ...
would be returned to service to supply 25 terajoules to industry. He estimated it would take up to six weeks before the plant was operational, and said, "These units are old and not as environmentally friendly as new generators. However, the state is facing a significant gas shortage and we need to look at all avenues". Power consumption will be reduced from 22
megawatts The watt (symbol: W) is the unit of power or radiant flux in the International System of Units (SI), equal to 1 joule per second or 1 kg⋅m2⋅s−3. It is used to quantify the rate of energy transfer. The watt is named after James Watt ...
to four megawatts a day at the State Government's water
desalination plant Desalination is a process that takes away mineral components from saline water. More generally, desalination refers to the removal of salts and minerals from a target substance, as in soil desalination, which is an issue for agriculture. Saltwa ...
in Kwinana, announced Carpenter on 12 June. He said this "will save around about five to six terajoules of energy a day which can be redirected to where it's needed...The decision will not jeopardise water supplies. We are able to switch the desalination plant back on to full production within a few hours ... four to five hours." On 17 June, two weeks after the explosion, Carpenter made an unprecedented public address on television and radio.
"Gas is not only a direct fuel source for industry, we use it in our homes and it's used to generate a large proportion of our electricity. While the State Government has the power to guarantee gas supplies to essential services and households, some industries and business have been hit hard. A number of them are being forced to scale back operations and others have temporarily closed.... We need your help. By continuing to work together we can lessen the impact of the gas shortage on our state, on our businesses and our families." – Carpenter, 17 June 2008
David Black, a political analyst, said Carpenter's address shows that the situation is serious: "Probably in terms of the total amount of gas and electricity being used, the community is a relatively small player...But politically, it is so important that they share the burden and that they be aware of the fact that they should be sharing the burden." Opposition Leader Buswell called for daily publication of a gas supply allocation for businesses. After Carpenter's address, power consumption fell 2% the next morning, on the coldest day since September 2007. Carpenter said, "The saved consumption was very, very significant, enough to power the city of
Geraldton Geraldton (Wajarri: ''Jambinu'', Wilunyu: ''Jambinbirri'') is a coastal city in the Mid West region of the Australian state of Western Australia, north of the state capital, Perth. At June 2018, Geraldton had an urban population of 37,648. ...
". On 18 June,
Prime Minister A prime minister, premier or chief of cabinet is the head of the cabinet and the leader of the ministers in the executive branch of government, often in a parliamentary or semi-presidential system. Under those systems, a prime minister is not ...
Kevin Rudd Kevin Michael Rudd (born 21 September 1957) is an Australian former politician and diplomat who served as the 26th prime minister of Australia from 2007 to 2010 and again from June 2013 to September 2013, holding office as the leader of the ...
told Federal Parliament that Premier Carpenter had established a Gas Supply Coordination Group, involving government agencies and industry representatives. Rudd said the
Royal Australian Navy The Royal Australian Navy (RAN) is the principal naval force of the Australian Defence Force (ADF). The professional head of the RAN is Chief of Navy (CN) Vice Admiral Mark Hammond AM, RAN. CN is also jointly responsible to the Minister of ...
was supplying six megalitres of diesel fuel to WA, and the Federal Government would consider invoking the Liquid Fuel Emergency Act if necessary, enabling federal Minister for Resources and Energy, Martin Ferguson, to control production, transfer and stock levels of
crude oil Petroleum, also known as crude oil, or simply oil, is a naturally occurring yellowish-black liquid mixture of mainly hydrocarbons, and is found in geological formations. The name ''petroleum'' covers both naturally occurring unprocessed crude ...
and other liquid fuel.
"This is a serious matter for Western Australia therefore it is a serious matter for all Australians... We believe that is an appropriate level of coordination between the two governments... I think people in the east have not quite caught up with the severity of the impact which this is having across the WA economy. It is huge... If there is a significant impact on WA economic activity and growth and on exports from that state, given the significance to the overall Australian economy, there will be wash through from us all on this over time." – Rudd, 18 June 2008
On 21 June, it was revealed that the state-owned electricity generator
Verve Energy Verve Energy was a Western Australian Government owned corporation responsible for operating the state's electricity generators on the state's South West Interconnected System (SWIS). It was split from the then vertically integrated Western Powe ...
continued to use hundreds of terajoules of gas each week, despite having access to diesel fuel. A spokesperson said the company had not been instructed to cut back its gas usage, and there was "no intention to use very expensive diesel instead of gas, especially when supplies and deliveries of diesel are stretched and Verve Energy continues to receive its supplies of gas from the
North West Shelf The North West Shelf is a continental shelf region of Western Australia. It includes an extensive petroleum, oil and natural gas, gas region off the North West Australia coast in the Pilbara region. Geology Considerable parts of the region are t ...
". Opposition Leader Troy Buswell said, "This is arrogance and hypocrisy of the highest order... They should be substituting gas for diesel, given the fact their plants can run on diesel. Gas could be re-directed to businesses which don't have choice about using gas or diesel." The State Government had also delayed approval of a new gas processing plant for Apache Energy by over six months, only allowing Apache to proceed after the gas crisis commenced and worsened. The lack of a State Government
contingency plan A contingency plan, also known colloquially as Plan B, is a plan devised for an outcome other than in the usual (expected) plan. It is often used for risk management for an exceptional risk that, though unlikely, would have catastrophic conseque ...
was criticised by Robert Amin,
Curtin University Curtin University, formerly known as Curtin University of Technology and Western Australian Institute of Technology (WAIT), is an Australian public research university based in Bentley, Perth, Western Australia. It is named after John Curtin, ...
's chair of Petroleum Engineering and chair of the Woodside Research Foundation, who said the Government should have stored enough gas in underground reservoirs to power the state for at least one month, to mitigate a potential crisis. Amin said gas could be stored in parts of the
Perth Basin The Perth Basin is a thick, elongated sedimentary basin in Western Australia. It lies beneath the Swan Coastal Plain west of the Darling Scarp, representing the western limit of the much older Yilgarn Craton, and extends further west offshore. C ...
depleted of gas, like Dongara, and companies could be offered tax incentives. Federal Opposition spokesperson for trade, Ian Macfarlane, called for a national audit of all gas pipelines, and highlighted the vulnerability of the single pipeline that carries WA's gas from the North West Shelf. Macfarlane said, "At the very least this event comes as a wake-up call for the construction of a second pipeline from the North West shelf to supply gas to industry especially in the south-western part of Western Australia." Professor Dong-ke Zhang, Director of the Centre for Petroleum, Fuels and Energy at the
University of Western Australia The University of Western Australia (UWA) is a public research university in the Australian state of Western Australia. The university's main campus is in Perth, the state capital, with a secondary campus in Albany, Western Australia, Albany an ...
, said, "I would have thought it was quite silly for a very advanced state like WA that we are not able to cope with an incident like this by not having the ability to divert gas from an
LNG Liquefied natural gas (LNG) is natural gas (predominantly methane, CH4, with some mixture of ethane, C2H6) that has been cooled down to liquid form for ease and safety of non-pressurized storage or transport. It takes up about 1/600th the volu ...
plant to the domestic pipeline. At a policy level, the infrastructure needs to be longer term and the Government should encourage major players like Woodside and
Chevron Chevron (often relating to V-shaped patterns) may refer to: Science and technology * Chevron (aerospace), sawtooth patterns on some jet engines * Chevron (anatomy), a bone * '' Eulithis testata'', a moth * Chevron (geology), a fold in rock ...
to invest in the infrastructure and give the incentives for the industry to come to the party because they get much bigger margins by selling LNG overseas."


Restoration of supply

A statement released by Apache Energy on 13 June 2008 said the company had sourced pipe and valves needed to repair the pipeline. Apache said it was increasing the number of staff on the island conducting integrity checks, with over 140 staff expected on site the following week. On 18 June, Apache Energy said it had commenced demolition and restoration of the damaged pipeline and expected this to be finished by the end of the following week. The pipe was already in Karratha and valves and fittings from the United Kingdom were expected to arrive in early July. Gas supply from the plant partially resumed in late August. By mid-October, gas production was running at two-thirds of normal capacity, with 85% of full output restored by December 2008. On 23 June 2008, Apache Energy released a statement that said limited production of 200 terajoules of gas from the East Spar Joint Venture would start by 15 August, with full production expected by December. Also on 23 June, the Muja power station came back online.
Western Power The Western world, also known as the West, primarily refers to the various nations and states in the regions of Europe, North America, and Oceania.
spokesperson Ken Brown said the plant will provide "very minimal megawatts because it has been out for many months, not just for pure maintenance, it's had a complete overhaul of the machine and the control, and it's going to take quite a while to commission that, but by next week it will be producing some significant coal megawatts and that's really good." Kwinana Unit 1, a power station located at Kwinana closed for maintenance before the explosion, was reactivated on 8 July. The 110 megawatt station operated at 60% capacity for the first few days before running at full capacity. Kwinana Unit 1 is expected to free up to five terajoules of gas daily.


Impact

While household gas supplies were largely unaffected, some businesses faced higher energy prices, most notably in the manufacturing and mining sectors. The supply disruption was partially mitigated by the availability of alternative fuel sources such as diesel (for power generation), additional supplies of gas from the North West Shelf plant, and the return to service of coal-fired power generation units. Overall, the gas shortage had a large impact on Western Australian industries, particularly mining, construction, and hospitality. Some affected companies declared
force majeure In contract law, (from Law French: 'overwhelming force', ) is a common clause in contracts which essentially frees both parties from liability or obligation when an extraordinary event or circumstance beyond the control of the parties, such ...
, and others are expected to make large insurance claims. If Apache Energy was found responsible for the pipeline explosion, compensation claims could be made against the company. State Premier Alan Carpenter said the Government will not offer compensation to businesses affected by the energy shortage, because "I don't think that the ordinary West Australian taxpayer would take too kindly to the State Government taking on a massive compensation bill for an interruption to a supply contract between commercial partners". A survey of 301 businesses conducted by the Chamber of Commerce and Industry showed on 18 June 2008 that nearly 630 employees had already been, or could be, stood down or made redundant - nearly 1% of the workforce surveyed. Almost 50% were affected by the gas shortage, with 11 companies already completely shut down. Up to 15% of companies surveyed could potentially close after three months of energy shortages. Chief Economist John Nicolaou said "To the extent that WA represents about 20 percent of the growth in the national economy over the past year, then that means it is going to have broader implications for the national economy. So it's important people around Australia understand the issue is significant from a national perspective, not just WA's perspective."
Macquarie Group Macquarie Group Limited () is an Australian global financial services group. Headquartered and listed in Australia (), Macquarie employs more than 17,000 staff in 33 markets, is the world's largest infrastructure asset manager and Australia' ...
economists estimated the energy crisis could reduce
gross domestic product Gross domestic product (GDP) is a money, monetary Measurement in economics, measure of the market value of all the final goods and services produced and sold (not resold) in a specific time period by countries. Due to its complex and subjec ...
growth by 0.25 percentage points in the third quarter, as gas prices increased and the percentage of gas production allocated to export reduced. Natural gas sales were worth $5.2 billion in the 2006/2007 financial year, and its five-year trend growth rate is 16.8%. Chief Macquarie economist Richard Gibbs said, "WA supplies the lion's share of the gas exports. The effect on exports is that as there is a shortage of gas in the system, the capability to export will be diminished because the gas that there is will be directed towards domestic use... The gas exports have been pretty healthy. In the next couple of quarters that will be moderated dramatically if not stalled altogether. I think this will have an impact on the broader commodities side and the
trade gap In international economics, the balance of payments (also known as balance of international payments and abbreviated BOP or BoP) of a country is the difference between all money flowing into the country in a particular period of time (e.g., a ...
could widen". Modelling undertaken by the WA Department of Treasury and Finance estimated that the gas crisis would affect Western Australia's exports of chemicals, metal products, textiles, clothing, footwear and rubber and plastic products. Treasurer
Eric Ripper Eric Stephen Ripper (born 13 September 1951) is a retired Australian politician. From 2008 to 2012 he was Leader of the Opposition and leader of the Labor Party in Western Australia. He grew up on a wheat/sheep farm near Nyabing. Ripper late ...
said, "In the long term, the disruption is estimated to reduce WA's economic value by $1.8 billion between 2007-08 and 2011-12... this $1.8 billion figure (estimated at 2008–09 values), only equates to 0.2 percent of the economy over the same five-year period." The WA Chamber of Commerce and Industry (CCI) released its quarterly report on 10 July, which said, "The gas crisis has already cost the Western Australian economy in the vicinity of $2.4 billion... With gas supply expected to be restricted until December 2008, CCI estimates the overall cost to be around $6.7 billion". The Reserve Bank reported in September that "the disruption is expected to result in a temporary reduction in national GDP growth of around 0.25%, with the impact spread across the June and September quarters".


Mining industry

Western Australian-based mining companies could have potentially lost hundreds of millions of dollars, because the state is the world's largest producer of
iron ore Iron ores are rocks and minerals from which metallic iron can be economically extracted. The ores are usually rich in iron oxides and vary in color from dark grey, bright yellow, or deep purple to rusty red. The iron is usually found in the fo ...
and one of the largest producers of
gold Gold is a chemical element with the symbol Au (from la, aurum) and atomic number 79. This makes it one of the higher atomic number elements that occur naturally. It is a bright, slightly orange-yellow, dense, soft, malleable, and ductile met ...
and
nickel Nickel is a chemical element with symbol Ni and atomic number 28. It is a silvery-white lustrous metal with a slight golden tinge. Nickel is a hard and ductile transition metal. Pure nickel is chemically reactive but large pieces are slow to ...
, exporting $48.4 billion of minerals and energy in 2006. Three days after the blast, the world's largest mining company,
BHP Billiton BHP Group Limited (formerly known as BHP Billiton) is an Australian Multinational corporation, multinational mining, metals, natural gas petroleum public company that is headquartered in Melbourne, Victoria, Australia. The Broken Hill Propri ...
, said it was assessing the gas shortage's impact, but its iron ore mines at Mount Newman and Nickel West were running normally. On 13 June, BHP Billiton brought forward the closure of its nickel smelter in
Kalgoorlie Kalgoorlie is a city in the Goldfields–Esperance region of Western Australia, located east-northeast of Perth at the end of the Great Eastern Highway. It is sometimes referred to as Kalgoorlie–Boulder, as the surrounding urban area includ ...
by four months, which increased its gas supplies for its
Worsley Alumina Worsley Alumina comprises a bauxite mine located near the town of Boddington and an Alumina refinery located near Worsley. Ore is mined then transported to the refinery via an overland conveyor system. Alumina is then transported to the port ...
refinery. A spokesperson for
Rio Tinto Rio Tinto, meaning "red river", may refer to: Businesses * Rio Tinto (corporation), an Anglo-Australian multinational mining and resources corporation ** Rio Tinto Alcan, based in Canada ** Rio Tinto Borax in America *** Rio Tinto Borax Mine, a ...
, the world's third-largest mining company, said the company was prioritising its power usage and using diesel and other alternative fuels for its mines, shipping terminals and railways. The world's third-biggest
gold Gold is a chemical element with the symbol Au (from la, aurum) and atomic number 79. This makes it one of the higher atomic number elements that occur naturally. It is a bright, slightly orange-yellow, dense, soft, malleable, and ductile met ...
producer,
Newmont Newmont Corporation is a gold mining company based in Greenwood Village, Colorado, United States. It is the world's largest gold mining corporation. Incorporated in 1921, it owns gold mines in Nevada, Colorado, Ontario, Quebec, Mexico, the Domin ...
, said it was "investigating alternative gas and energy sources", and
Iluka Resources Iluka Resources is an Australian-based resources company, specialising in mineral sands exploration, project development, operations and marketing. Iluka is the largest producer of zircon and titanium dioxide-derived rutile and synthetic rutil ...
, the largest
zircon Zircon () is a mineral belonging to the group of nesosilicates and is a source of the metal zirconium. Its chemical name is zirconium(IV) silicate, and its corresponding chemical formula is Zr SiO4. An empirical formula showing some of the r ...
producer, shut down its Western Australian operations on 5 June and said it was awaiting advice from power supplier
Alinta Alinta was an Australian energy infrastructure company. It has grown from a small, Western Australia-based gas distributor and retailer to the largest energy infrastructure company in Australia. It was bought in 2007 by a consortium including S ...
.
Oxiana Limited Oxiana Limited was an Australian copper and gold miner and exploration company. History Oxiana was founded in 1932 as Golden Plateau and listed on the Australian Stock Exchange. In the early 1980s, the company shifted its focus from gold mining ...
, soon to be the world's second-largest
zinc Zinc is a chemical element with the symbol Zn and atomic number 30. Zinc is a slightly brittle metal at room temperature and has a shiny-greyish appearance when oxidation is removed. It is the first element in group 12 (IIB) of the periodi ...
producer, used standby diesel power at its Golden Grove mine until 6 June, when they obtained an alternative source.
Newcrest Newcrest Mining Limited is an Australian-based corporation which engages in the exploration, development, mining and sale of gold and gold-copper concentrate. It is Australia's leading gold mining company and its operations have expanded beyo ...
, a gold mining company located at Telfer, switched to its limited stockpile of diesel fuel.
Fonterra Fonterra Co-operative Group Limited is a New Zealand multinational publicly traded dairy co-operative owned by around 9,000 New Zealand farmers. The company is responsible for approximately 30% of the world's dairy exports and with revenue exce ...
also switched to diesel power.
Minara Resources Minara Resources Pty Ltd is one of the major mining companies of Australia, specializing in the mining of cobalt and nickel. It is one of the top ten nickel mines in Australia. It is wholly owned by the Swiss commodities trading firm, Glencore ...
, the country's second-largest nickel producer, was "using the time opportunistically on plant maintenance", as natural gas was its
Murrin Murrin Mine The Murrin Murrin Mine is a major nickel-cobalt mining operation being conducted in the North Eastern Goldfields, approximately 45 km east of Leonora, Western Australia. The project was initiated as a joint venture between Murrin Murrin ...
's only energy source. Minara Resources predicted that its full-year production would be reduced by 8%.
Alcoa Alcoa Corporation (an acronym for Aluminum Company of America) is a Pittsburgh-based industrial corporation. It is the world's eighth-largest producer of aluminum. Alcoa conducts operations in 10 countries. Alcoa is a major producer of primary ...
, which operates bauxite mines and alumina refineries with Alumina, declared force majeure as a precaution on 11 June. A spokesperson said, "We are continuing production, which is down a bit, and we are fuelling our energy needs with diesel supply... we have enough diesel to last us for weeks, but not months". Alcoa's United States parent company said it expects the company's second-quarter earnings to be reduced by $12–17 million due to the extra cost of gas and diesel. Woodside Petroleum's
North West Shelf Venture The North West Shelf Venture, situated in the North West Shelf, north-west of Western Australia, is Australia's largest resource development project. It involves the extraction of petroleum (mostly natural gas and Natural-gas condensate, condens ...
increased production of natural gas to meet Apache Energy's shortfall. Apache's managing director Tim Wall said it was a small quantity of relief; Premier Carpenter said Woodside was providing an extra 50 terajoules of gas per day for the domestic energy grid.


Other industries, businesses and domestic customers

The construction and hospitality industries were strongly affected by the energy shortage.
Brick A brick is a type of block used to build walls, pavements and other elements in masonry construction. Properly, the term ''brick'' denotes a block composed of dried clay, but is now also used informally to denote other chemically cured cons ...
producers Midland Brick and Austral closed their kilns within the first week after the blast, and on 11 June, the Chamber of Commerce and Industry warned that 14% of local businesses could close.
UnionsWA UnionsWA is the peak Trades and Labour Council in Western Australia. It represents over 30 affiliated unions, which have over 150,000 members in Western Australia. The council is affiliated with the Australian Council of Trade Unions (ACTU). Na ...
said thousands of workers were being stood down or made to take
annual leave Annual leave is a period of paid time off work granted by employers to employees to be used for whatever the employee wishes. Depending on the employer's policies, differing number of days may be offered, and the employee may be required to gi ...
, and the secretary Dave Robinson said mining, timber, beef, pork, laundries and transport industries workers were worst affected. Supplies of gas and electricity to residential customers are protected by state government legislation introduced in 2006. The impact of the crisis on
Wesfarmers Wesfarmers Limited is an Australian conglomerate, headquartered in Perth, Western Australia. It has interests predominantly in Australia and New Zealand, operating in retail, chemical, fertiliser, industrial and safety products. With revenue o ...
' subsidiaries caused a slump in the company's share prices. Wesfarmers managing director,
Richard Goyder Richard James Barr Goyder AO (born 1960) is an Australian businessman and sporting administrator who is the current chairman of the AFL Commission, the governing body of Australian Rules Football. He was previously CEO and managing director of ...
, said, "At this stage, our best estimate is that the pre-tax impact on group profit will be up to $20 million per month at the current level of gas supply. A portion of that loss is expected to be recovered from insurance". The subsidiaries affected are
CSBP CSBP Limited is an Australian fertiliser and chemical company based in Kwinana, Western Australia. It is a subsidiary of WesCEF, which in turn is part of the industrials division of the Wesfarmers conglomerate. Current operations CSBP produce ...
, which can no longer produce ammonium nitrate, Wesfarmers LPG, which has delayed commissioning of a new liquid natural gas plant in WA, and Premier Coal, whose sales have been reduced due to the closure of some of its customers, such as Iluka Resources. There was speculation in the media on whether the
AFL AFL may refer to: Sports * American Football League (AFL), a name shared by several separate and unrelated professional American football leagues: ** American Football League (1926) (a.k.a. "AFL I"), first rival of the National Football Leagu ...
football Football is a family of team sports that involve, to varying degrees, kicking a ball to score a goal. Unqualified, the word ''football'' normally means the form of football that is the most popular where the word is used. Sports commonly c ...
game at
Subiaco Oval Subiaco Oval (; nicknamed Subi) was a sports stadium in Perth, Western Australia, located in the suburb of Subiaco. It was opened in 1908 and closed in 2017 after the completion of the new Perth Stadium in Burswood. Subiaco Oval was the high ...
on 21 June between the
West Coast Eagles The West Coast Eagles are a professional Australian rules football club based in Perth, Western Australia. The club was founded in 1986 as one of two expansion teams in the Australian Football League (AFL), then known as the Victorian Football ...
and
Geelong Football Club The Geelong Football Club, nicknamed the Cats, is a professional Australian rules football club based in Geelong, Victoria, Australia. The club competes in the Australian Football League (AFL), the sport's premier competition, and are the 2022 ...
should be moved from night to daytime, to avoid using the oval's lights. According to
Western Power The Western world, also known as the West, primarily refers to the various nations and states in the regions of Europe, North America, and Oceania.
, the electricity used by the oval's lights for four hours of operation could power more than 1,300 homes, but a spokesperson from the
Office of Energy An office is a space where an organization's employees perform administrative work in order to support and realize objects and goals of the organization. The word "office" may also denote a position within an organization with specific du ...
said, "Effectively the amount of energy used to light a game at night is less than what would be used if those thousands of people were at home with lights and other services operating".
Western Australian Trotting Association Western may refer to: Places *Western, Nebraska, a village in the US * Western, New York, a town in the US * Western Creek, Tasmania, a locality in Australia * Western Junction, Tasmania, a locality in Australia *Western world, countries that ...
chief executive, Rob Bovell, said if they were forced to move races at Gloucester Park from night to day, they would "probably lose half a million dollars in turnover and our customers would drop by 70 percent. Clearly this would cause major damage to us financially because our business is set up to race at night time. However if we are using energy that is affecting emergency services we will close down tomorrow." Fifty representatives from
shopping centres A shopping center (American English) or shopping centre (Commonwealth English), also called a shopping complex, shopping arcade, shopping plaza or galleria, is a group of shops built together, sometimes under one roof. The first known collec ...
and
office towers A skyscraper is a tall continuously habitable building having multiple floors. Modern sources currently define skyscrapers as being at least or in height, though there is no universally accepted definition. Skyscrapers are very tall high-ris ...
met on 16 June to discuss energy-saving ideas. The WA Property Council said "Non essential power including decorative lighting in shopping centres will be switched off. We'll also be looking at chillers and heating systems to ensure they use less power. At the moment we are in winter mode and they are running to heat the buildings so we will have to lower them, while main buildings will look at switching off non essential lifts". Perth's tallest building,
Central Park Central Park is an urban park in New York City located between the Upper West Side, Upper West and Upper East Sides of Manhattan. It is the List of New York City parks, fifth-largest park in the city, covering . It is the most visited urban par ...
, turned off its heating on 17 June, with General Manager Tim Ward saying, "We're not expecting anyone to be anything but compliant".
Royal Perth Hospital Royal Perth Hospital (RPH) is a 450-bed adult and teaching hospital located on the northeastern edge of the central business district of Perth, Western Australia. History The hospital traces its history back to the first colonial hospital, whi ...
's plans for coping with decreased gas supplies were leaked to the media at the end of June, which showed a 30% reduction in gas would cause phase 1, changing linen "only when soiled" and having "one towel per patient". Phase 2, a further 20% decrease, would result in "reductions in elective surgical procedures", "prioritisation of equipment for sterilisation", sourcing oxygen supplies from interstate and restricting patients' showers to "four minutes, second daily". Further reductions could lead to cancellations in elective surgery, rationing food and transporting "infectious linen" interstate for laundering. Industrial gas provider BOC reduced its supply of carbon dioxide to
pubs A pub (short for public house) is a kind of drinking establishment which is licensed to serve alcoholic drinks for consumption on the premises. The term ''public house'' first appeared in the United Kingdom in late 17th century, and was ...
for
draft beer Draught beer, also spelt draft, is beer served from a cask or keg rather than from a bottle or can. Draught beer served from a pressurised keg is also known as Name Until Joseph Bramah patented the beer engine in 1785, beer was served dire ...
, whilst the shortage also threatened WA's wineries, who use carbon dioxide for bottling. BOC gave priority to the health industry, which uses carbon dioxide to sterilise equipment and in
anaesthesia Anesthesia is a state of controlled, temporary loss of sensation or awareness that is induced for medical or veterinary purposes. It may include some or all of analgesia (relief from or prevention of pain), paralysis (muscle relaxation), am ...
. The state's other major carbon dioxide supplier,
Air Liquide Air Liquide S.A. (; ; literally "liquid air"), is a French multinational company which supplies industrial gases and services to various industries including medical, chemical and electronic manufacturers. Founded in 1902, after Linde it is ...
, also shut down production, leading to fears that WA's largest pork
abattoir A slaughterhouse, also called abattoir (), is a facility where animals are slaughtered to provide food. Slaughterhouses supply meat, which then becomes the responsibility of a packaging facility. Slaughterhouses that produce meat that is no ...
would close.
Westpac Westpac Banking Corporation, known simply as Westpac, is an Australian multinational banking and financial services company headquartered at Westpac Place in Sydney, New South Wales. Established in 1817 as the Bank of New South Wales, it ...
offered help to personal customers affected by the gas crisis, by allowing customers to defer home loan repayments for up to three months and restructure loans at no fee, increasing credit card limits and speeding up insurance assessments. Other banks and credit-lenders offered similar assistance to their customers.


Official inquiries


Technical investigation by NOPSA

Following a four-month investigation, the
National Offshore Petroleum Safety Authority The National Offshore Petroleum Safety and Environmental Management Authority (NOPSEMA) is the Australian Government offshore energy regulator responsible for the health and safety, well integrity and environmental management aspects of offshore ...
(NOPSA) handed down its report into the causes of the incident on 10 October 2008. Numbered copies of the 92-page report were made available to members of the public upon request to the Department of Mines and Petroleum. According to the report, the plant was operating normally up until the incident. The immediate cause was the rupture of the 12" Sales Gas Pipeline at the NNE beach crossing, and that "the gas released from the ruptured pipeline ignited very soon after the rupture". The rupture of the pipeline was caused by
corrosion Corrosion is a natural process that converts a refined metal into a more chemically stable oxide. It is the gradual deterioration of materials (usually a metal) by chemical or electrochemical reaction with their environment. Corrosion engine ...
of the external surface of the pipe "resulting in excessive stresses of the pipe wall". The report provides the likely sequence of events following the initial rupture, including the failures of other pipelines located near the 12" Sales Gas line, contributing to the intensity of the fire and damage to the gas plant. According to evidence available to NOPSA, the main causal factors in the incident were: *ineffective anti-corrosion coating at the beach crossing section of the sales gas pipeline *ineffective
cathodic protection Cathodic protection (CP; ) is a technique used to control the corrosion of a metal surface by making it the cathode of an electrochemical cell. A simple method of protection connects the metal to be protected to a more easily corroded "sacrific ...
of the wet-dry transition zone of the beach crossing section of the pipeline, and *ineffective inspection and monitoring by Apache Energy of the beach crossing and shallow water section of the pipeline. A section of the report titled "Impediments to the Investigation" refers to the investigation team's frustrated attempts to interview staff of Apache Energy in relation to pipeline inspection, monitoring, and the company's maintenance and repair regime. The company declined to make its key personnel available for questioning by NOPSA. The investigators' efforts were also hampered by Apache's delays in releasing the results of laboratory analysis of pipeline materials related to the incident. Apache produced a comprehensive "corporate response" to a set of written questions provided by NOPSA, seven weeks after receiving the request. The report notes that "these matters directly impacted on the ability of the investigation team to develop its findings within the agreed time period and resulted in aspects of some lines of inquiry not being fully settled". The report identified that Apache and its co-licensees may have committed offences under the Petroleum Pipelines Act and associated regulations, and that there may have been non-compliance with pipeline license conditions.


Senate inquiry

On 28 August 2008, the
Senate A senate is a deliberative assembly, often the upper house or chamber of a bicameral legislature. The name comes from the ancient Roman Senate (Latin: ''Senatus''), so-called as an assembly of the senior (Latin: ''senex'' meaning "the el ...
referred a number of matters relating to the gas crisis to its Standing Committee on Economics. The inquiry focussed on the economic impact of the crisis (losses faced by business and industry; relevance of contractual arrangements) and government responses (crisis management; emergency measures; alternative energy sources). Written submissions were made by numerous business and industry bodies, and six days of public hearings in Perth, Bunbury and Canberra were held during October. Written submissions to the inquiry included claims of unfair allocations of gas, inadequate communication of important information during the crisis, and the scale of the impact on individual businesses and industries. The committee was initially expected to report by 13 November 2008. The Committee tabled its 84-page report on 3 December 2008, listing six key recommendations to minimise the impacts and risks of future supply disruption, including developing a comprehensive energy security plan, and changing the methods of allocating remaining supplies during a major disruption. In terms of the
macroeconomic Macroeconomics (from the Greek prefix ''makro-'' meaning "large" + ''economics'') is a branch of economics dealing with performance, structure, behavior, and decision-making of an economy as a whole. For example, using interest rates, taxes, and ...
impact of the gas crisis, the Committee relied heavily upon State Treasury forecasts provided during its inquiry, including that "the June 2008 disruption in gas supplies... is expected to cost the Western Australian economy around $2 billion in Gross State Product (GSP) terms, with roughly half of this impact in each of the June and September quarters of 2008. This translates to approximately a 0.5 percentage point reduction in estimated GSP growth in 2007-08, from 7.5% at budget-time to 7.0%." The report refers to the Reserve Bank's modelling of the national impact of the crisis, "that the disruption is expected to result in a temporary reduction in national GDP growth of around 0.25 percentage point, spread across the June and September quarters... as national GDP is around a trillion dollars, a 0.25 percentage point represents about $2½ billion, so the Reserve Bank estimate is broadly consistent with that of the Western Australian Treasury." In assessing the state government's response to the crisis, the report recommended that the newly elected state government honour the Carpenter government's pledge on 6 August 2008 to develop an energy security plan. The plan should include possible contingency options, but warned any contingency option that would be of sufficient scope to mitigate significantly the impact of a gas shortage on the scale of that experience after the Varanus Island incident would be very expensive and could present significant technical and environmental challenges." The inquiry examined the mechanisms and emergency supply protocols established by the WA government to mitigate the effects of the crisis. According to the committee, the protocols were appropriate, and the residential supply "was crucial to ensure that negative health impacts were minimised, particularly as the incident occurred in winter." The Committee said it received submissions that the campaign to reduce household gas consumption "was misplaced as (households) only directly account for around three to five per cent of overall gas consumption." However, the Committee concluded that the campaign was appropriate under the circumstances. The document contained a 15-page dissenting report written by the five
Coalition A coalition is a group formed when two or more people or groups temporarily work together to achieve a common goal. The term is most frequently used to denote a formation of power in political or economical spaces. Formation According to ''A Gui ...
members of the Committee. This report directly criticised the
Labor Labour or labor may refer to: * Childbirth, the delivery of a baby * Labour (human activity), or work ** Manual labour, physical work ** Wage labour, a socioeconomic relationship between a worker and an employer ** Organized labour and the labour ...
government's lack of a contingency gas supply plan, despite two previous supply disruptions in 2006 and early 2008. The government "ignored these precedents, as well as industry advice, to develop an appropriate contingency response plan to deal with such a crisis and accordingly deserves strong criticism". The government's communication with industry and customers was "sporadic at best", and it should have declared a state of emergency to control gas distribution, rather than leaving distribution to market forces and a bulletin board system.


Joint Commonwealth-State inquiry

On 23 December 2008, the State Government formally announced a joint inquiry (funded by the Commonwealth) into the Varanus Island gas disaster. To be set up as a 2-person expert panel inquiry and expected to conclude by April 2009, it will "focus on the effectiveness of the regulatory system and the regulators for upstream petroleum operations and recommend improvements to the existing system." According to the new WA Premier,
Colin Barnett Colin James Barnett (born 15 July 1950) is a former Australian politician who was the 29th Premier of Western Australia. He concurrently served as the state's Treasurer at several points during his tenure and had previously held various other po ...
, the original inquiry focussed solely on the cause of the explosion, rather than considering surrounding issues. The Premier said that any recommendations arising from the report would ultimately be referred to the Ministerial Council on Mineral and Petroleum Resources (MCMPR) for implementation.


2012 report release

On 24 May 2012, the Western Australian government's minister for Mines and Petroleum Norman Moore tabled in parliament the Bills-Agostini Report, and further public comment has come from lawyers representing Apache in response.


See also

*
Energy crisis An energy crisis or energy shortage is any significant bottleneck in the supply of energy resources to an economy. In literature, it often refers to one of the energy sources used at a certain time and place, in particular, those that supply n ...


References


External links


Varanus Island Pipeline Incident
Apache Energy
Media Releases
National Offshore Petroleum Safety Authority
Varanus Island Pipeline Incident
Department of Mines and Petroleum The Department of Mines and Petroleum was a department of the Government of Western Australia until it was superseded by the Department of Mines, Industry Regulation and Safety on 1 July 2017.
(Western Australia)
Energy Update Information
Office of Energy (Western Australia)

Federal Senate {{Economy of Australia Natural gas in Western Australia Western Australian Gas Crisis, 2008 Western Australian gas crisis, 2008 Energy crises in Australia Economic history of Western Australia