IEEFA Comments on Northern Gas Pipeline Environmental Impact Statement

In May 2016 the Institute for Energy Economics and Financial Analysis (IEFFA) wrote a report that highlighted that the Northern Gas Pipeline (NGP) was not a commercial venture without substantial government subsidies either in the form of direct grants or inflated tariffs to transport the gas.

The report provided a comprehensive analysis of the global markets for traded liquid natural gas (LNG) and highlights the fact that global markets are currently oversupplied and demand is much weaker than expected from the major importing nations of Japan, Korea and China. There is a large amount of new LNG production that will come on stream between now and 2020 from projects that are already under construction further exacerbating the over supply situation. The glut in global LNG supply is expected to last out until 2030. The outlook for gas prices in such a market is similarly weak.

This submission is a supplement to our report entitled Pipe Dream – A Financial Analysis of the Northern Gas Pipeline.

The need to supply manufacturing industry with gas on the East Coast of Australia is a pressing issue for policy makers in the Energy arena. However what is missed in the debate is that this supply must be at a globally competitive price. Without globally competitive gas pricing for manufacturing these downstream businesses will simply go out of business.

The NEGI will not be able to supply either the east coast manufacturers or the export market at a reasonable price.

It will be able to supply some manufacturers in Mt Isa however the gas will not flow further as it is simply uneconomic when high pipeline transportation costs are factored in.

The Northern Territory government (via the wholly owned Power and Water Commission) is paying over twice a commercial rate of return to transport the gas it is proposing to supply to the Northern Gas Pipeline. This is wholly uncommercial and unsustainable.