May 20, 2016 Read More →

Northern Territory Gas Pipeline the ‘Whitest of White Elephants’

Angela Macdonald-Smith in the Sydney Morning Herald:

The economic case for the $800 million North East Gas Interconnector pipeline is being questioned in a report to be released on Thursday which says the gas delivered through the line will be too expensive for east coast buyers.

The lack of customers for the project other than the foundation customer Incitec Pivot has already seen the size of the pipeline reduced, and underscores that it is not needed, the Institute for Energy Economics and Financial Analysis, known for its anti-fossil fuel stance, says in the report.

The NEGI pipeline is set to run between Tennant Creek and Mount Isa, connecting the Northern Territory into the eastern states gas grid for the first time. It is being built by China-controlled Jemena, which won the contract to build the line late last year in a NT government-run process.

The line would be able to supply NT gas to the LNG export projects in Queensland but the glut in the global LNG sector means the Queensland gas export industry is running at a loss, IEEFA says. It concludes that the pipeline project has been conceived to compensate for a “poor decision” by the NT government utility Power and Water Corporation to over-contract on its gas supplies, given gas from PWC will provide the foundation volumes to be transported through NEGI.

“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,” said Bruce Robertson, author of the report.

He says the construction of NEGI is based on a set of fundamental misunderstandings, the most glaring the lack of customers for the line.

“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,” he said, describing the NEGI line as “the whitest of white elephants”.

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