Lock the Gate Alliance says a damning report revealing the shaky economic underpinning of the controversial shale gas pipeline between the Northern Territory and Queensland means the project must be put on hold until a national interest test for gas projects is in place.
The North East Gas Interconnector (NEGI) is being proposed at a time in which global LNG markets are in a glut, and in the absence of effective national policy and legislation to prevent water resources being irreparably depleted by proposed shale gas exploitation.
A report released by the Institute for Energy Economics and Financial Analysis yesterday revealed that shale gas production costs in the Territory would be expensive and that gas demand estimates relied upon by Australian Governments are inflated.
Lock the Gate National spokesperson Phil Laird said, “This is a high cost bandaid solution to cover up massive over investment in LNG capacity at Gladstone.”
"Australian Governments have been asleep at the wheel in the strategic management of our energy resources. During a period of oversupply, Australia 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.
"The ALP’s announcement this week of a national interest test for new gas projects may have come just in the nick of time to stop this foolhardy and damaging push to exploit vast areas of the Northern Territory for shale gas.
"It’s crucial that the NEGI pipeline and shale gas exploration in the Territory be stopped so that sensible policy controls can be put in place. We don’t want to see a repeat of the environmental and economic debacle unfolding in Queensland, and that’s what we’ll get if NEGI goes ahead.
"The Federal water trigger doesn’t even apply to shale gas at this stage, even though shale always requires fracking and is among the most water-intensive mining methods there is. That’s how uneven the regulation is, and ill-prepared this country is for more reckless gas projects.
"For the sake of Australia’s strategic interests, and our communities and environment, both major parties need to stop and rethink policy on invasive unconventional gas, and bring in stronger protections for water resources."
Background
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On 17 November 2015 Jemena announced that it had won the tender to build the North East Gas Interconnector (NEGI)
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The NEGI is a proposed 623km pipeline linking Tennant Creek in the Northern Territory to Mt Isa in Queensland. It would connect the Northern Territory with the Eastern gas market.
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The NEGI is being built to open up the Northern Territories undeveloped unconventional gas resources. Its cornerstone customer is the Northern Territory’s Power and Water Commission.
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Last week, Lock the Gate released national mapping revealing that 35% of the Australian landmass is covered with coal and gas mining and exploration titles and applications.
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The Northern Territory is particularly threatened: 85% of the Territory is affected by gas exploration licences or applications. Most exploration in the Territory is likely to be for shale gas, which requires fracking to extract and is very water intensive.
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On Wednesday, the ALP announced its intention to introduce a “national interest test” for new gas projects in response to the economic damage inflicted by the coal seam gas to LNG export industry in Queensland.
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The IEEFA report released this week found that, the global LNG market is oversupplied, with 245Mt sold in 2015 compared to global liquefaction capacity of 308Mt. That surplus is at 26% and rising. Indeed, the global LNG industry is in a demand crisis that is particularly acute in North Asian markets critical to Australia. Demand for LNG from Australia’s three largest markets—Japan, Korea and China—declined in aggregate over 2015.
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Domestically, inflated demand forecasts of five years ago have now been dramatically revised downward. The Australian Energy Market Operator shows domestic gas demand fell 4.0% year on year in 2015 to 654.8PJ.
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The report describes the NEGI pipeline as “a bad decision being promoted to cover up another bad decision” and says that “Neither the NEGI nor the larger East Coast onshore gas export market has sufficient customers for their high-priced product.”
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Northern territory onshore gas fields are higher cost than the currently loss-making Eastern Australian onshore export gas fields. Northern producers also have to contend with large distances to get their product to market. It is little wonder that Jemena has not signed any customers apart from the Northern Territory government-owned Power and Water Commission (PWC).