WA gas reservation 'adds to capital cost'

Australia's peak oil and gas sector lobby group is unhappy Western Australia's gas reservation policy has been applied to an LNG project for the first time.

The WA government has signed an agreement with the Woodside-led Browse joint venture whereby it will quarantine 15 per cent of production from the state's 65 per cent share of one of the project's three gas fields for the domestic market.

Former premier Alan Carpenter introduced the domgas policy in late 2006, requiring 15 per cent of gas from offshore projects to be set aside for local use.

The Australian Petroleum Production and Exploration Association said the state government should be looking to reduce the cost and regulatory burden on LNG projects if it wants to attract investment in the present economic environment.

"WA's domestic gas market is already well supplied into the future," APPEA spokesman Stedman Ellis said.

"The government needs to accept that its reservation policy simply adds to the capital cost of projects that are already facing growing global competition."