Northern Territory gas extraction- unviable, uneconomic and purely political in nature
2 May 2017
From the IEEFA:
The Institute for Energy Economics and Financial Analysis (IEEFA) has lodged a submission with the Northern Territory (NT), a Territory in Northern Australia, to the ‘Fracking Inquiry’ that shows the persistent international glut in cheap gas, coupled with the high price of extracting NT shale gas, will render the shale gas industry ultimately unviable in the Territory.“High cost shale gas fracking in the Northern Territory is simply not an economic prospect,” said Bruce Robertson, Analyst Gas/LNG Australasia, IEEFA, and author of the submission.“The onshore gas players are talking up supplying Territory gas for export, but realistically at current rates they would be forced to supply it at a financial loss, any economist would see this as stupidity.“In the Northern Territory, production costs for onshore shale gas have been estimated at A$7.50 a gigajoule, and that’s just to get the gas out of the ground. This price does not, in any way, seriously compare favourably on a global scale.“Currently spot prices in Japan are less than A$7.50 a gigajoule. That is after the gas has gone through the expensive liquefaction and transport process,” Robertson said.“Total costs of Northern Territory gas delivered to Asia would be over A$16 a gigajoule. That’s a substantial 78% higher than what customers are currently paying under long term contracts.“No matter which way you look at it, or the politicians in the Territory or Canberra suggest you look at it, quite simply none of this will be palatable, or in any way commercially interesting, to buyers, anywhere.“The costs of production and transportation of NT shale gas do not match the prices consumers are willing to pay in either Asia or domestically.“Shale gas fracking in the Territory just does not make economic sense,” he said.“As I point out in my submission, the development of high cost shale gas in the Northern Territory could actually result in higher gas prices and decreased energy security for Northern Territory consumers.“Unconventional onshore gasfields linked to export terminals have caused havoc and price shocks for consumers in the Eastern States of Australia,” said Robertson.“The coal seam gas industry in QLD has resulted in soaring domestic prices for gas and decreased availability for domestic consumers.“You cannot forget that any alleged economic benefits for the Territory from the proposed onshore shale gas fracking industry are illusory, as the gas extracted will fail to be a competitive product – anywhere.“There is also a risk that investment in high cost shale gas in the Northern Territory would stymy investment in energy that can be provided at a lower price and with greater certainty to consumers,” Robertson concluded.