Chapter 1 - Background to the Inquiry
Referral and terms of reference
1.1
On 28 August 2008, the Senate referred the following matters to
the Standing Committee on Economics for inquiry and report:
- the economic impact of the Western Australian gas crisis, including
but not limited to:
- the extent of losses faced by business and industry failing to
meet production targets due to the lack of gas supplies,
- the disproportionate disruption to industry in the south west of Western
Australia, and
- the nature of contractual arrangements forced on business and
industry during the gas crisis and their status since the resumption of gas
supplies from Varanus Island; and
- the government response to the Western Australian gas crisis,
including but not limited to:
- the adequacy of the crisis management response,
- the adequacy of reliance on one source of supplies of gas for
domestic markets,
- the provision of reliable and affordable supplies of alternative
energy,
- the feasibility of developing emergency storage facilities of gas
in depleted reservoirs or other repositories, and
- the justification for any refusals to release relevant facts and
documents publicly.
1.2
Initially the report was due by 14 October 2008. However the Senate subsequently agreed to extensions of the reporting date to 3 December 2008.
Conduct of the inquiry
1.3
The committee advertised the inquiry nationally and posted
details about the inquiry on its website. In addition, it wrote to over 35
organisations advising them of the inquiry and inviting them to make submissions.
1.4
The committee received 32 submissions to the inquiry. These are
listed at Appendix 1, and are available at the committee's website
https://www.aph.gov.au/senate_economics/.
1.5
Five public hearings were held in Perth (2 October 2008), Bunbury (3 October 2008) and Canberra (28 and 29 October
and 26 November 2008). Witnesses appearing at these hearings are listed
in Appendix 2.
1.6
The committee thanks all those who participated in the inquiry.
Outline of the report
1.7
Chapter 1 provides a brief overview of the conduct of the inquiry
and details of the actual incident that occurred on Varanus Island on 3 June 2008.
1.8
Chapter 2 discusses the economic impact of the incident. An
overview of the macroeconomic impact and impact on particular industries and
regions is provided.
1.9
Chapter 3 examines the government response to the incident. The
use of emergency powers, contingency planning (including the feasibility of
some suggested contingency options), the government's consultation strategies,
government involvement in the allocation of available energy, energy saving
measures, the Gas Bulletin Board, government hotlines, and the role of
Commonwealth Government agencies are discussed.
1.10
Chapter 4 examines the response by the energy industry to the
incident. The chapter begins with an overview of the structure of the Western
Australian energy industry and then considers the deployment of alternative
conventional power sources, contractual arrangements and prices charged by
energy retailers after the incident, and industry involvement in the allocation
of available energy.
1.11
Chapter 5 examines the development of an energy security strategy
and options for diversifying sources of energy in Western Australia, including
the potential for increased use of alternative and renewable energy sources.
1.12
Chapter 6 outlines the committee's conclusions and
recommendations.
The explosions on Varanus Island
1.13
On the afternoon of 3 June 2008 a series of explosions followed
by fires occurred at gas production facilities on Varanus Island, 100 kilometres
west of Karratha and Dampier. There were no injuries or fatalities as a result
of the explosions and fires, but approximately 30 per cent of Western Australia's
gas supply (~350 terajoules per day) was lost. A report from the National
Offshore Petroleum Safety Authority to the Western Australian government found
that the cause of the explosions was the rupture of a corroded pipe.[1]
1.14
The oil and gas production facilities on Varanus Island are owned
by Apache Energy. Partial production was resumed in early August, and by early
October it was up to two-thirds of previous production but full production is
not expected to resume until December 2008.[2]
1.15
As noted above, the terms of reference for this inquiry direct
the committee to examine the economic impact and government response subsequent
to the explosions, not the causes of the explosions.
Navigation: Previous Page | Contents | Next Page