As many parts of Australia are being exposed to soaring natural gas prices amid a local energy crisis, contrastingly affordable WA gas is fuelling heated bidding wars.
Western Australia’s domestic gas policy requires liquefied natural gas (LNG) projects to reserve 15 per cent of LNG production from each LNG export project for domestic use.
This has kept WA gas prices down amid a recent energy crisis, while gas prices have soared on the east coast where a less explicit “gas trigger” is in place at the whim of the Minister of Resources.
Warrego Energy and Norwest Energy, which own gas assets in the Perth Basin, are both at the centre of takeover tussles, with Hancock Prospecting and Strike Energy keen to acquire Warrego, while Mineral Resources (MinRes) has launched a bid for Norwest.
Strike currently has a $0.385 per share bid for Warrego on the table, which represents a 37.5 per cent premium to Hancock’s current offer of $0.28 per share and a 61.8 per cent premium to Warrego’s 30-day volume-weighted average price (VWAP).
Strike owns a 19.9 per cent stake in Warrego while Hancock owns more than 25 per cent of Warrego shares.
Norwest Energy recently rejected MinRes’ $0.06 per share bid to acquire all remaining shares in the company, calling it “opportunistically timed”. MinRes currently owns 19.9 per cent of Norwest.
Strike Energy chair John Poynton told The Australian Financial Review that the Perth Basin bidding wars were indication that fossil fuels still have a big role to play.
“People who are very successful, very wealthy and build their own businesses tend not to take much notice of the current narrative,” he said.
“These people are all going, ‘nah, I don’t think so. I think these assets, or these resources, are actually seriously valuable and strategic, and we want more of them’.
“Of course, there are things that gas can do that even renewable electricity can’t. In some situations, gas is not replaceable by any other energy source.”
Poynton said the Perth Basin would become the cheapest source of onshore gas in Australia, and Hancock and MinRes are eyeing these assets to power their mining operations and downstream mineral processing ambitions.
The news comes amid a Western Australia gas crisis that recently saw Alcoa cut alumina production from its Kwinana alumina refinery, while South32 also minimised gas use across its WA alumina operations.
This was brought on by an outage at Chevron’s Wheatstone gas plant, which has since been resolved.