NGP From Energy News

	Column 1
0	NGP a ‘white elephant’
1
2	Haydn Black Friday, 20 May 2016 THE $800 million Northern Gas Pipeline, being developed to tale gas from the Northern Territory to Tennant Creek and the east coast pipeline network has been once again described as a white elephant, this time by a US anti-fossil fuel think tank. The Institute for Energy Economics and Financial Analysis yesterday questioned the economics and financial footing of the pipeline, which is being built by Jemena, a Singaporean and Chinese government-owned company. “The construction of the northern gas pipeline is predicated on a set of fundamental misunderstandings, the most glaring of which is the lack of customers,” IEEFA's Australia-based investment analyst Bruce Robertson said. “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.” It also said the project was "conceived to compensate for a poor decision by the Power and Water Corporation to contract to buy too much gas". "The corporation overestimated demand, a common failing of government agencies, and is attempting now to on sell that gas," the report said. Backers of the NEGI proposal have already cut capacity by 25%, with the pipe resized from 14-inch to 12-inch pipe in April because of a lack of customers and gas, and IEEFA says there is so much gas in the world, which is oversupplied by LNG, that the pipeline makes no sense. Further, it warns that the NT 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. “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. Developing this high cost shale gas resource, let alone a pipeline, flies in the face of common sense,” Robertson said But the NGP will start off with conventional gas from the Amadeus Basin and the Blacktip field in the Bonaparte Basin, which is more than enough to meet the needs of foundation customer Incitec Pivot, and meet additional needs in the domgas market. IEEFA says the domgas market appears to be too small to justify the pipeline, and LNG exports are unrealistic. The Incitec Pivot contract only accounts for about one-third of the capacity of the pipeline Lock The Gate has welcomed the report, and says it must be put on hold until a national interest test for gas projects is in place. “This is a high cost bandaid solution to cover up massive over investment in LNG capacity at Gladstone,” Lock the Gate National spokesperson Phil Laird said. “Australian Governments have been asleep at the wheel in the strategic management of our energy resources. During a period of oversupply, Australian is delivering more expensive gas to fill export orders while driving up costs for domestic users. “Rushing to extract more gas for export in the middle of an international LNG glut fails Economics 101…” Lock The Gate opposes fraccing in the NT, and the ALP has warned it will place a moratorium on the practice if it wins office in August, while Federal Labor’s proposed national interest test is aimed at forcing gas into the domestic market. NT Minister for Mines and Energy David Tollner said the deal struck with Jemena to offload surplus gas from PWC meant the NT was "finally finding a market for gas that it was never going to use". Jemena's executive general manager of business development Antoine Bowie told the ABC the report showed a "misunderstanding of the nature of regulation in Australia". He said he was confident demand in the gas market would grow, despite the current over-supply of LNG. "The industry is a very long-term industry, so all the LNG projects in Queensland are fully contracted to sell their LNG for the next 20 years ... there should be no suggestion that LNG won't find a home and it can't be sold," Bowie said. Share this story: