Natural gas, pipeline are likely losers, says report

p2329-pipelineBy ERWIN CHLANDA

 

The planned construction of the Tennant Creek to Mt Isa gas pipeline is based on a set of fundamental misunderstandings, the most glaring of which is the lack of customers.

 

That’s the view expressed in a report released yesterday by the Institute for Energy Economics and Financial Analysis based in Cleveland, Ohio, USA.

 

On last night’s ABC TV News, in response to the report NT Business Minister Peter Styles said the demand will go up and down, without giving details, and a spokesman for Jemena, which received the NT Government’s contract to build the pipeline, said the company would not invest its own money in a bad deal.

 

And Chief Minister Adam Giles said yesterday his government will fund a study of turning gas into low-emission diesel for outback electricity generation and use in transport.

 

The report says Jemena, which is Singaporean and Chinese government-owned, and has paid no income tax in Australia in the four years to December 31 last year.

 

And even if there is money in the venture, the major benefit will not be in Australia: “The Northern Territory government has gifted two overseas governments the right to run a natural monopoly that is unregulated and the pipeline can charge whatever tariffs it sees fit.”

 

Says the author, Bruce Robertson: “The shining hope of increased royalties through the establishment of a shale gas industry appears to have blinded the Northern Territory Government to economic reality.

 

“Developing a pipeline which aims to deliver high-cost gas into an already saturated market is the whitest of white elephants.”

 

Backers of the pipeline proposal have already cut capacity by 25%, with the pipe resized from 14-inch to 12-inch pipe last month, says Mr Robertson.

 

“Our research suggests this scale-back is likely to be only the beginning.”

 

Last month “the International Group of Liquefied Natural Gas Importers estimated the global LNG market in 2015 was over-supplied by 26%.

 

“Meantime, global LNG supply is rising rapidly, with global LNG liquefaction capacity expected to reach an increase of 30% from 2015.

 

“The Australian government forecaster, the Office of the Chief Economist, has predicted a global surplus of LNG capacity out to 2030. Moreover, at prices seen in the first half of 2016 to date, the entire east coast onshore gas export industry of Australia is running at a loss.”

 

Mr Robertson says the Northern Territory shale gas industry is in its infancy and the reality is that production of this onshore gas would come at significantly higher cost than even the east coast onshore gas export industry, which is already too expensive in a global context.

 

“The gas produced would be expensive at the wellhead, expensive to transport across an unregulated transmission network and expensive to liquefy in high capital cost plants.”

 

Mr Robertson is an Australia-based investment analyst.

 

 

Be Sociable, Share!

8 Comments (starting with the most recent)

NB: If you want to reply to a previous comment, start your comment with this notation: @n where n is the number of the comment you want to reply to.
  1. Trevor Shiell
    Posted May 31, 2016 at 10:47 am

    So CPT has now contracted to sell its gas to MacQuarie Bank (see the ASX company notices).
    Does that mean that the gas that we are to use to generate our electricity will be purchased from the millionaire’s factory, or do they know things that we don’t, as usual?
    One would have thought that at least a token amount of the money spent at Brewer on generation would have gone to looking at beyond the current year or two when we may have at few thousand electric cars heading up the track.
    What a great draw card for tourism to be able to drive right across the country on renewable energy. Queensland already is planning a solar highway while we struggle with obsolete technology.
    I too am an ex CLP supporter, and very disillusioned.

    View Comment
  2. David de Vries
    Posted May 21, 2016 at 5:49 pm

    The IEEFA.org report is well worth a read. It tears strip after strip from any idea that the pipeline makes any business sense
    Jemena do have a foundation customer, the NT Government’s Power Water Corporation has been pulled away from their core business to contract gas pushed to Mt Isa for fertilizer manufacturing.
    Incitec Pivot are pinching themselves over saving $55m per annum in gas costs compared to what they pay on the open market. Deviouser and deviouser.

    View Comment
  3. Joel Olzomer
    Posted May 21, 2016 at 12:54 pm

    In fairness Graeme Lewis, every minister could just about be Mines Minister (given the reshuffles they probably have).
    Every element of the Territories economic and social future is apparently reliant on dirty, high cost gas that the market doesn’t really need. I.e.: If your kids want improved education we need fracking.

    View Comment
  4. Dalton Dupuy
    Posted May 21, 2016 at 11:15 am

    It is really interesting that the whole world is moving away from fossil fuels because of the damage it causes, like what is going on with “the reef”; and here we have an NT government and its leadership moving backwards.
    A gas pipeline, REALLY! So are they really advocating stuffing up the water supply and then continue to poison our air and places like the Great Barrier Reef?
    We also know that it is likely any MLA that supports this pipeline and hydraulic fracturing is personally culpable for that decision. So stop this nonsense now.

    View Comment
  5. Hal Duell
    Posted May 21, 2016 at 11:09 am

    With the apparently imminent collapse of the high-cost US shale oil industry, the NT’s own shale oil industry may quickly become a pipe-dream. Good. At least this will keep our water safe for now.
    The whole exercise of trying to damage Russia through collapsing the world’s oil price has resulted in a glut of oil on the world markets.
    You have to wonder if the policy boffins inside the Beltway have taken to wearing bullet-proof shoes.
    Word is the Saudis are now buying the Yankee fracking technology for pennies on the pound.

    View Comment
  6. Erwin Chlanda
    Posted May 21, 2016 at 7:57 am

    Hi Greame, Mr Styles must have been speaking as Business Minister. Thanks for pointing out the error. I amended the story.
    Erwin Chlanda, Editor.

    View Comment
  7. Graeme Lewis
    Posted May 20, 2016 at 10:34 pm

    “Mines Minister Peter Styles?” What do you know that no-one else does?

    View Comment
  8. Disgusted ex CLP
    Posted May 20, 2016 at 4:48 pm

    This is getting beyond ridiculous. The CLP is braindead.
    Alice Springs residents who believe there is any hope of repair for this party are deluded.
    Can anyone actually point to three good things that this government has done? On any front?
    The fracking royalty future is just lies lies lies and treating the voters like idiots.
    Ex CLP voter.

    View Comment

Post a Comment

Your email is never shared. Required fields are marked *

*
*