Confusing analysis arrives at a garbled conclusion

May 20th, 2016

The Institute for Energy Economics and Financial Analysis (IEEFA) released a report this week which they claim shows the North East Gas Interconnector (NEGI) project:

“(I)s being proposed at a time in which global liquefied natural gas (LNG) markets are in a glut. The NEGI deal—if it were built—would occur under a monopoly arrangement whose economic benefits, if there are any, would be limited to foreign owners.”

As a reminder, NEGI is the proposed pipeline between Tennant Creek in the NT and Mt Isa in Queensland.

At a distance of more than 600 kilometres and an estimated capital cost of around $800 million, it is a major undertaking by the successful tenderer, Jemena.

A proposed second stage would see the pipeline extend from Mt Isa to Wallumbilla, connecting to the East Coast gas market.

It’s an odd report in many respects – arguing against private sector investment in the delivery of major infrastructure by suggesting the only beneficiaries will be foreign Governments, while at the same time conflating a range of domestic and international economic issues and market trends to draw the long bow conclusion that the project is, in the words of IEEFA, ‘likely to fail’.

In the analysis, claims are made about the commerciality of contracts struck to support the pipeline, but without actually explaining the construct of those contracts, apart from using some broad assumptions.

The report covers a lot of territory – even going as far as to suggest that:

“Australia’s lack of scientific analysis on the fugitive emissions relating to methane could materially jeopardise Australia’s key LNG target markets”

How is not explained, but the report’s author also repeats the hackneyed activist accusation that the CSIRO lacks independence.

So, who is IEEFA? Based in the United States, the group’s mission is to:

“accelerate the transition to a diverse, sustainable and profitable energy economy and to reduce dependence on coal and other non-renewable energy resources”

It is funded by philanthropic organisations – some of whom have a long history in supporting anti-fossil fuel activist groups.

On their website, IEEFA acknowledges the Rockefeller Brothers Fund, and the William and Flora Hewlett foundation among others – both of which have funded US research critical of the gas industry.

Lock the Gate was quick to use the report to call for a halt to the NEGI project, claiming that:

“This is a high cost bandaid solution to cover up massive over investment in LNG capacity at Gladstone”

That’s an odd statement to make, considering the pipeline has nothing to do with Gladstone, but LTG is never one to let facts get in the way of another scare campaign.

If IEEFA and their supporters are truly interested in accelerating the transition to a sustainable and profitable energy economy, then they’d spend less time talking down a project that will create jobs in construction, as well as unlocking the Northern Territory’s fledgling shale gas industry, and more time looking at the role gas can play in supporting a transition to renewables.


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