Pipeline linking north-west gas fields to east coast manufacturing divides experts

Pipeline linking north-west gas fields to east coast manufacturing divides experts

A trans-Australia gas pipeline could either deliver cheap energy to east coast manufacturers while boosting WA’s economy, or be a white elephant that private industry would never touch. Who do you believe?

The Federal Government’s proposal to underwrite a $5 billion gas pipeline is back on the agenda.

The Government hopes to link the gas fields in the north of Western Australia to manufacturers along the east coast to snap the economy out of a post-COVID funk.

It is a part of a draft report obtained by the ABC, from the manufacturing taskforce of the National COVID Coordination Commission.

Much of the media’s focus has been on conflict of interest of some commission members with links to the petroleum industry, but the concept of a gas link has attracted supporters and detractors.

Pipeline a ‘no-brainer’

Dr Brian Evans is a professor in petroleum engineering at Curtin University, who has consulted to the North West Shelf on LNG exports and domestic markets.

He said that a gas pipeline from LNG plants on the Pilbara coast could do much more than power Australian manufacturing on Australia’s east coast.

“Having this pipeline as basic infrastructure expands the possibilities of opening up the Canning and Fitzroy,” Dr Evans said.

Environmentalists have worried about plans to develop the potentially huge gas and water resources of the Kimberley’s Canning Basin and Fitzroy River for many years but the proposal has also struggled to demonstrate economic feasibility.

But Dr Evans said a gas pipeline, underwritten by government, was the key that could open up the region, and could also pave the way for an adjacent water pipeline and long-distance electricity transmission.

“A spur running up to the Canning Basin could potentially open up the Kimberley to exploration,” Dr Evans said.

“It’s the fundamental infrastructure that could reduce the costs and open up the Canning Basin and the potential for water to come finally from the Kimberley down south, rather than flowing out into the ocean.”

The Fitzroy River flows across the Kimberley and meets the sea near the town of Derby.(ABC Kimberley: Ben Collins)

‘Bang for your buck’ is debatable

While the COVID Commission has proposed the transcontinental gas pipeline in response to the pandemic, it is not a new idea.

The Federal Government commissioned an economic feasibility study of an east-west pipeline in 2017, under then prime minister Malcolm Turnbull.

Paul Hyslop is the chief executive of Australia’s largest economics consulting firm Acil Allen, the company that won the tender to complete the study.

It found the high cost of a pipeline and the rapid changes underway in energy markets presented unacceptable risk for a government to underwrite.

“It means that we transfer risk that the private sector doesn’t want to take to the government, and ultimately onto the taxpayer, at a time when the government is borrowing a lot of money to basically keep the economy going,” Mr Hyslop said.

He said the potential for a gas pipeline to spur further development in regions like the Kimberley was questionable.

“If we’re going to spend money on infrastructure, we need to make sure it’s high value and highly productive,” he said.

“This east-west gas pipeline does not give you good bang for your buck.”

Australia has relatively few gas pipelines compared to more densely populated countries like the United States.(Supplied: INPEX)

Long-term value

Dr Roberto Aguilera, an energy economist at Curtin University, said the reality that Australia would rely on gas for many decades to come would make an east-west pipeline a positive investment.

He said the pipeline concept could tap into Australia’s biggest undeveloped gas reserves and drive the economy for generations.

“One authoritative estimate puts it at something like 250 trillion cubic feet of natural gas in the Canning Basin,” Dr Aguilera said.

“To put it into perspective, the proved reserves of Australia as a whole are something like 80-85 trillion cubic feet.”

Those estimates generated a flurry of interest in Australia’s north-west gas resources almost 10 years ago, but little has eventuated in the Canning Basin.

Dr Aguilera said the pipeline would change the equation and the volumes of gas would allow the investment to prove its worth over decades.

“I’ve seen a few different estimates on the economic viability, they come to different conclusions which is no surprise when you consider that the results of theses kinds of studies are very much dependent on the assumptions,” he said.

“This would have tremendous benefits for GDP growth in the region, it would create employment too and represent an important source of fiscal revenue.”

The North West Shelf Gas Plant in the Pilbara region supplies gas to Western Australia and for LNG export.(Babs McHugh: ABC Rural)

Dr Evans compared the $5 billion needed for the gas pipeline to the investment in the Snowy Hydro 2.0 scheme, which he said had a similar cost but less benefits.

“It makes the Snowy Scheme seem like small economics, because this is power for 50 to 100 years,” he said.

Pipeline vs import terminal

But Paul Hyslop said even on a time-scale measured in decades, a trans-Australia pipeline was the wrong project to reboot the nation’s economy.

“The statement that we’re going to rely on gas for a long, long time to come is questionable in the context that we’re attempting to de-carbonise our economy completely by around 2050 or 2060,” he said.

He said even if high demand for gas was maintained, a pipeline could not compete with a LNG import terminal that could bring gas to the east coast by ship for less than a tenth of the construction cost.

“It means that you can tap into markets, not just from Western Australia, but from all over the world through the spot LNG markets,” Mr Hyslop said.

“We think that it’s much more likely that people are going to want to go down the route of LNG import, and at the moment in fact there are two projects being worked on, on the east coast.

“There are plenty of other projects out there in Australia that we can develop that are going to improve our infrastructure and improve our productivity, and this [gas pipeline] is not one of them.”

An LNG (liquefied natural gas) import terminal can deliver gas via tankers from a range of markets.(Supplied: Woodside Energy)


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