The Narrabri Gas Project - Submission to Independent ......2020/08/10 · The clear established global trend is towards more renewable power in electricity systems, and less gas

Bruce Robertson, Energy Finance Analyst, Gas/LNG August 2020

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The Narrabri Gas Project -Submission to Independent Planning Commission The State of NSW Should Not Sponsor a Loss-Making, Wealth Destroying Industry

Executive Summary WhentheIndependentPlanningCommissionNSW(IPC)assessestheclearandunequivocalevidencesurroundinganyoneoftheeconomic,environmental,socialandgovernance(ESG)factorssurroundingtheNarrabriGasproject,theCommissionwillhavenootheravenuebuttorejecttheproposal.

WesetoutthereasonswhytheIPCmustrejecttheNarrabriGasproposalinthissubmission,andsummarisethekeypointsbelow:

• Gasisnolongerservingaroleasatransitionfueleitherdomesticallyorglobally.Theclearestablishedglobaltrendistowardsmorerenewablepowerinelectricitysystems,andlessgas.

• Thereisaglobalsupplyglutofgasthatwillcontinueuntillatethisdecade.Thefactorsthatledtothegreatglobalgasglutwereinplacepriorto2020.OverbuildingofLNGplantsandover-productionofuneconomicshaleandcoalseamgas(CSG)hasoccurredforyears.TheCOVID–19demanddepressionhasmerelyacceleratedtheprocess.

• GloballytheLNGindustryisinadeepdepression.TheU.S.shalefrackingindustryhasimplodedwithmultiplebankruptciesandaseveredepressioninactivity.CargoshipscarryingLNGarecirclingoceanssearchingforabuyer.

• Globally,gaspricesareverydepressed.ThereisnoplaceforhighcostNarrabrigasinthismarket.

• Domestically,gasusagehasshrunk.InAustralia,gasusageingas-firedpowerplantshasdeclinedby58%1since2014whilstrenewableshaveincreasedtoproduce25%oftheenergyintheNationalElectricityMarket.

• TheAustralianEnergyMarketOperator,theonlyagencytomodelafutureelectricitygridinitsIntegratedSystemsPlan,hasshownthatby2040,theroleofgasinarenewablerichgridissmallerthantoday.

1AEMO.NaturalElectricity&GasForecasting.

The Narrabri Gas Project Submission to Independent Planning Commission

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• Queensland’sCSGtoLNGprojectatGladstoneisafinancialfailure.Santos’CSGtoLNGGladstoneexperimentontheeastcoastofAustraliahasbeenafinancialfailurewithnearly$8bnwrittenoff.Thelatest$976mwrite-offwasannouncedinJuly2020shortlyafterSantosgaveevidencebeforetheIPC.ThethreeleadcompaniesintheconsortiumthatownthethreeexportCSGtoLNGplantsatGladstonehavewrittenoffover$24bnsince2014ontheirfailedinvestments.

• Everyyearsince2014Santoshasfailedtofulfilitsexportcontracts.

• Santoshasdemonstrablydestroyedshareholdervaluesince2014.

• Eastcoastgasconsumerspaytoomuchforgas.TheACCC’sgaspriceenquiry(2017-2025)repeatedlyshowsthattheAustraliandomesticconsumerpaystoomuchforgas.

• TheNarrabrigasprojectwillnotbringdownthecostofgasforthedomesticconsumerasSantosclaims.AnddespiteclaimstothecontrarybytheDepartmentofPlanning,furthersupplyandhighproductioncostswillaffectthedomesticmarket.TheNarrabrigasprojectwillembedhighcostgasintothesystem,forcingupthepriceofgasforthedomesticconsumer.

• SantoshasmisledtheIndependentPlanningCommissionastothecostsavingsithasmadeintheEastCoastCSGindustry.

• TheeastcoastgasindustryisonlyahandfulofplayersthathaveconsistentlypricegougedtheAustraliandomesticconsumerandourgovernmentshaveallowedthemto.This‘cartel’hassocialiseditslossesontheexportmarketsovertheAustralianenergyconsumer.

• SantosisnotafitandproperentitytoholdaCSGproductionlicenceinthestateofNSWasithasactivelyfloutedapprovalconditionsinQueensland.

• Gasuseinindustryhasfallen12%since2014.Highgaspriceshavesignificantlycontributedtohighwholesaleelectricityprices.

• Santos’royaltyclaimsarenottransparent.TheIPCshouldlookattheCSGtoLNG’sindustries’contributiontosocietyintermsoftaxandroyaltiesandjudgeitaccordingtoitsactualhistoryinQueenslandandnottheextravagantclaimsof$1.2billioninroyalties,backedbyscantevidence,madebytheproponentofthisproject,Santos.

• Gasuseinresidentialandcommercialapplicationscanlargelybesubstitutedforcheaperelectricalheating,intheformofairconditioners,inductioncookingandheatpumpsforhotwater.Thiswouldunfetterupto190petajoules(PJ)perannumanddwarfthecontributionofatbest70PJfromNarrabri.

• TheeastcoastofAustralianeedsadomesticgasreservationpolicy.Adomesticgasreservationonexistingandprospectivefieldsat$4/GJistheonly


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waytoensurelowpricesandassuredsupplyforAustraliandomesticconsumers.

• TheQueenslandexperienceisthatover570agriculturalwaterboreswillrundry(injustonegasfield)asadirectresultofCSG.ThattheDepartmentofPlanninghasnothighlightedthis,andthecleardamagetowaterresourcesthatisthelivedexperienceinQueensland,islamentable.

• Emissionsfromunconventionalgasfieldsarehighandwhenburnedinpeakingplantsandusedforexportarenobetterthancoalfortheclimate.

• Gasisahighgreenhousegasemittingfuel.EveryStateandTerritoryinAustraliahassomesortofnetzeroemissionstargetby2050.ProducingandconsumingmoregasisfundamentallyopposedtocurrentStateandTerritorygovernmentpoliciesonemissions.

• TheNarrabrigasprojecthasencounteredstaunchandwidespreadopposition.ACSGprojectwithalargeenvironmentalfootprintonbothpublicandprivatelandneedsasociallicencetooperate.

• Thegovernancesurroundingthegasindustryispoor.ScienceisconductedbythedeeplyconflictedarmoftheCSIR0,thegasindustrysponsoredGasIndustrySocialandEnvironmentalResearchAlliance(GISERA).

• TheNSWapprovalsprocessisnotfit-for-purposetoassessCSGprojects.

• TheNSWChiefScientist’s16recommendationsforthesafeoperationofCSGinNSWhavenotbeenfullyimplementeddespitethefinalreportbeingreceivedbytheNSWgovernment6yearsago.Thegasindustryand/orgovernmentcannotclaimsafeoperationofprojectsuntilall16recommendationshavebeenfullyimplemented.ApprovingNarrabriintheabsenceofsuchoversightwouldbeextremelyreckless.

IEEFAasksthattheIPCconsiderstheeconomic,environmentalandsocialgovernance(ESG)factorsoftheNarrabrigasproject.

TheNarrabriGasprojectisnotapprovableoneconomicgrounds,oronESGmetrics.

SantosisnotafitandproperentitytoholdaCSGproductionlicenceintheStateofNSW.

TheEastCoastCSGtoLNGindustryhastornupthewealthofournation.

Tocontinuetoallowitto,byapprovingNarrabri,isnotlogicalorreasonable.


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Content

ExecutiveSummary.................................................................................................................1

TheGlobalContext...................................................................................................................5

GasisNotaTransitionFuel..................................................................................................8

TheAustralianGasIndustry.............................................................................................11TaxandRoyaltiesfromTheOnshoreGasIndustryinAustraliaHaveBeenNotablyAbsent........................................................................................................................20WeNeedtheGasforIndustry..........................................................................................21

PolicyResponsesWouldFixtheProblemsinTheEastCoastGasMarket....22

ESG:EnvironmentalandSocialGovernance..............................................................23

EnvironmentalIssues..........................................................................................................................................23

SocialIssues.............................................................................................................................................................28

GovernanceIssues.................................................................................................................................................28


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The Global Context Globally,renewablesareoverwhelmingnewfossilfuelandnuclearpowerstationbuilds.

Since2010newrenewableplantshavegrownbyapproximately148%whilstnuclearplusfossilfuelplantshavedeclinedby38%.Globally,nuclearhasnotbeenasignificantsourceofnewpowerstationbuilds.(SeeFigure1)

Figure 1: Global New Power Station Builds

In2019,200gigawatts(GW)ofrenewablepowerplantswerebuiltwhilstonly100GWoffossilfuelandnuclearwereconstructed.

Itshouldbenotedthatlessgaspowerplantswerebuiltin2020thanin2001.

Gasisnolongerservingaroleasatransitionfuel.

The Great Global Gas Depression Wearenotseeingaslowdownindemandorevenarecessionintheglobalgasindustry;wearewitnessingadepressionintheglobalgasindustry.

TheU.S.frackingindustryhasimploded.

ThenumberofoperatingdrillrigsintheU.S.hasfallen73%inthelast12months.(seeFigure2)Therehavealsobeenover19oilandgasbankruptciessofarthisyear.


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Figure 2: Number of Operating Drill Rigs

Source: Baker Hughes Rig Counthttps://rigcount.bakerhughes.com/

DeloitteestimatesthatalmostathirdofU.S.shaleproducersaretechnicallyinsolventatcurrentoilprices.2Theshaleindustryhasbeencashflownegativeeveryyearinthelastdecade.(seeFigure3)

Figure 3: Deloitte – US Shale Oil and Gas Producers Free Cash Flow

2Bloomberg.ThirdofU.S.ShaleNearTechnicalInsolvency,DeloitteSays.22June2020.


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Further,U.S.LNGexportshavedeclinedbymorethanhalfsofarin2020.LNGshipsfromallnationsarecirclingintheoceanwhilsttryingtofindabuyerfortheirunwantedcargoes.34

Figure 4: US LNG Industry Volumes Halve

Gas/LNGpriceshavecollapsed.5Figure5fromtheResourcesandEnergyQuarterlypublishedbytheDepartmentofIndustryquotesoilprices.ExportLNGgascontractsarepricedasapercentageoftheoilprice,hencetherelevanceofoilprices.

Figure 5: LNG Prices Fall to Historic Lows

3SMH.Sailingaroundincircles:LNGtankersidleatseaasbuyersdelaycargoes.16July2020.4SMH.Australiaissponsoringafailinggasindustry.23July2020.5OCE.ResourcesandEnergyQuarterly.June2020.Page68.


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Inshortthereisamassiveglobalglutingassupplythatwillextendouttolateinthisdecade.TheglobalgasglutwasnotcausedbyCOVID-19.Iwastalkingabouttheloominggasglut3yearsagoinanaddressIgaveinNewYork.COVID-19merelyacceleratedtheprocess.

Gas is Not a Transition Fuel Gas Usage in The National Electricity Market is Declining Significantly InAustraliagasusageingas-firedpowerplantshasdeclinedby58%6since2014whilstrenewableshaveincreasedtoproduce25%oftheenergyintheNationalElectricityMarket(NEM).7

Figure 6: Gas Usage by Gas Powered Generation in the National Electricity Market (NEM) 2010-2020

Source: Australian Electricity Market Operator (AEMO), IEEFA

TheAEMO,theonlyagencytomodelafutureelectricitygridinitsIntegratedSystemsPlan8,hasshownthatinarenewablesrichgridby2040,theroleofgasissmallerthanitistoday.(SeeFigure7)

6AEMO.GasAnnualConsumptionTotal.7OpenNEM.NEM.8AEMO.2020IntegratedSystemsPlan.July2020.

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Figure 7: AEMO Integrated Systems Plan – Least Cost Development – Central Scenario

Source: Australian Electricity Market Operator (AEMO) Integrated Systems Plan. Page 40. Note: Gas is the combination of CCGT (Combined Cycle Gas Turbines or gas baseload plants) and Peaking gas plus liquids (Open Cycle Gas Turbines or gas peaking plants)

IntheIntegratedSystemsPlan,AEMOconsidersthatinvestmentintonewGas-PoweredGeneration(GPG)isunlikely:

“GPGcanprovidethesynchronousgenerationneededtobalancevariablerenewablesupply,andsoisapotentialcomplementtostorage.Theultimatemixwilldependupontherelativecostandavailabilityofdifferentstoragetechnologiescomparedtofuturegasprices.ThisfavoursexistingGPGplants,butfurtherinvestmentinGPGislesslikelybasedontheassumptionsusedinthisISP,particularlyinscenariosthathavecarbonbudgetstomeet.”9

9AEMO.2020IntegratedSystemsPlan.July2020.Page53.


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Figure 8: Australian Electricity Market Operator (AEMO) Existing and New Developments by Fuel Technology

Source: AEMO

Gaspeakingplants,orastheyaretermedOpenCycleGasTurbines(OCGT),onlycontributed1.5%10oftheNEM’sgenerationintheyearto1July2020whilstaccountingfor12.5%11ofcapacity.

Putsimply,weneedcapacityingaspeakingplants,buttheyarenotrunforlong.Wedon’tneedmuchgastopowerthem.

AllnewinvestmentinAustraliaisfloodingintosolar,windandhydro.Themostrecentexample,posttheCOVID-19lockdown,istheCentralWestRenewableEnergyZone(REZ)wheretheNSWgovernmentcalledfortendersfor3GWofrenewablepowerprojectsandgotbackresponsesfor27GW.12Thetenderwas9timesover-subscribed.

10OpenNEM.NEM.11AEMO.GenerationInformation.12ABC.NSWGovernment'srenewableenergyplanattractsmorethan100potentialinvestors.23June2020.


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The Australian Gas Industry The Australian Gas Industry division – West Australia vs Eastern Australia

TheAustraliangasindustryisclearlydividedbetweentheefficientWesternAustralianLNGindustryandthefinanciallydisastrousEastCoastCoalSeamGas(CSG)toLiquefiedNaturalGas(LNG)industry.

The Development of The East Coast Gas Industry TheEastCoastgasindustrywasirrevocablyalteredbytheopeningof3largeexportterminalsinGladstonein2014-15.(Foramorein-depthlookatthetransformationoftheEastCoastGasmarketpleaseseeIEEFA’sreport,Gladstone:TheRisksMount.13)

FollowingthedevelopmentofGladstone,themarketwentfrom‘domesticonlygas’toexportingover70%.14Thepricerisesinducedinthedomesticmarketsawdomesticgasconsumptiondeclineby21%intheperiod2014–2020.

Table 1: The Transformation of The East Coast Gas Market – Gas Consumption in PJ

Source: AEMO Thegascompaniesmadetwofundamentalmistakes:

1. TheydramaticallyunderestimatedthecostsoftheLNGplants,15and

2. Theygottheircostsofproductionforgashorriblywrong.Farfromproducinggasat$2.20-2.70/GJtheyproducedgasforbetween$3.50and$8.50/GJ.16

Theresulthasbeenthatover$24bnhasbeenwrittenoffthefailingeastcoastCSGtoLNGindustry.

13IEEFA.Australia’sExportLNGPlantsatGladstone:TheRisksMount.June2017.14AEMO.GasAnnualConsumptionTotal.15IEEFA.Australia’sExportLNGPlantsatGladstone:TheRisksMount.June2017.Page21.16IEEFA.Australia’sExportLNGPlantsatGladstone:TheRisksMount.June2017.Page22.

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020fGas Powered Generation (GPG) 212 198 210 195 220 175 139 184 130 155 92Industrial 291 293 301 302 297 280 264 257 254 255 262Residential and Commercial 181 178 184 174 172 192 185 192 190 190 192Total Domestic Consumption 684 669 695 671 689 647 588 633 574 600 546LNG exports 0 0 0 0 5 325 1060 1219 1237 1325 1415Total Production 684 669 695 671 694 972 1648 1852 1811 1925 1961


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Shellisattemptingtosella26.25%stakeinitsfailedinvestment.Santoshasalreadywrittenoff$1.5bnofitsinvestmentintheNarrabriproject.

Rystad,theenergyconsultant,estimatesthatatcurrentpricing,18%ofeastcoastproductionisuneconomic.17

Santos Export LNG Business Has Failed Santos’exportLNGbusinessisheldthrougha30%interestintheGLNGconsortium.FeedgasissourcedfromGLNG’supstreamfields,Santos’portfoliogasandthird-partysuppliers.18

Accordingtothe2014Santosannualreport,theGLNGfacilityhasacapitalcostof$21.3bn.19Asacapital-intensivebusiness,theplant’seconomiccapacityutilisationratesshouldbeveryhigh,typicallyabove85-90%,butSantoshasbeenunabletoachievesuchlevels.

TheGLNGplanthastwoproductiontrainswithacombinedcapacityof8.6MT(milliontonnes).ProductionfromTrain1commencedinSeptember2015andTrain2inMay2016.20TheLNGplantproducedjust4.8MTofLNGin2018,utilisingjust56%ofcapacity.In2019theLNGplantproduced5.2MTofLNGoperatingatjust61%ofcapacity.

AsSantosoperatesonacalendaryearending31December,theresultsabovearepre-COVID-19.TheglobalgasglutcausedbyoverinvestmentinLNGfacilitiesworld-wideandexacerbatedbyCOVID-19ensuresthattheoutlookfortheindustryisverypoor.

ItisunlikelythatSantos’GLNGinvestmentwillimproveuponits2019resultin2020,leavingitaseverelyunderperformingasset.

Santos Has Failed to Fulfil Its Export Contracts SantoshastwolongtermcontractstofulfiloutofitsGLNGjointventuretotalling7.6MT.Eachcontractisfor3.8MTPAover20yearswithPetronasandKogas.21Thecontractsstartedin2015and2016respectively.Santoshasnotbeenabletofulfiltheseobligationsasyet.

Indeed,Santoshasbeenunabletofulfilthecontractstosupplygastooffshorecustomerseveryyearsince2014.

17RystadEnergy.Upto42%ofAustraliangasresourcesuneconomicalatcurrentLNGnetbackprices.3April2020.18Santos.AnnualReport2019.Page21.19Santos.AnnualReport2014.Page43.20Santos.AnnualReport2019.Page21.21IEEFA.Australia’sExportLNGPlantsatGladstone:TheRisksMount.June2017.Page20.


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Santos Has Destroyed Shareholder Wealth Santos’failedinvestmentintheCSGtoLNGindustryhasseeninvestorstorched.In2014Santos’shareswere$12-13.Today,theyareunderhalfthatlevelatjust$5.Whilethemarkethasrisen,Santoshasfallen.

The Staggering Write-Offs in The East Coast CSG to LNG Industry ThethreeexportplantsatGladstoneareownedbyconsortiumheadedbySantos,OriginEnergyandShell.(seeTable2)

Table 2: Ownership of The Three Export Plants at Gladstone

Source: Total, Shell, APLNG (https://www.total.com/news/australia-gladstone-lng-ships-first-liquefied-natural-gas-cargo; https://www.aplng.com.au/about-us.html; https://www.shell.com.au/about-us/projects-and-locations/qgc/about-qgc.html)

Annual Consortium ShareholderProject Capacity

(MT)Lead Shareholders Percentage Comment

Australia Pacific LNG (APLNG) 9 Origin Energy

Origin Energy 37.5 Origin Energy is an Australian Stock Exchange listed public company. Origin is responsible for the operation of the APLNG gas fields and the main gas transmission pipeline.

Conoco Philips

ConocoPhillips 37.5 ConocoPhillips is a US based oil and gas multinational. It is responsible for the construction and operation of the two train APLNG facility on Curtis Island.

Sinopec 25 Sinopec Group is China's second largest crude oil and natural gas producer. It is China's largest petroleum products and chemicals producer and supplier.

Santos Gladstone LNG (GLNG) 8.6 Santos Santos 30 Santos is an Australian Stock Exchange listed public company

Petronas 27.5 Petronas is Malaysia's national oil and gas company and the worlds second largest exporter of LNG.

Total 27.5 Total is a large french integrated oil and gas major

Kogas 15 Kogas is short for Korean Gas Corporation- the worlds largest LNG importer

QCLNG 8.5 Shell Shell 73.75 Shell took over British Gas (BG Group) in February 2016. BG had in turn taken over Queensland Gas Company in November 2008. Shell also owns Arrow Energy.

CNOOC 25 China National Offshore Oil Corporation ("CNOOC"), the largest offshore oil & gas producer in China, is a state-owned company operating directly under the State-owned Assets Supervision and Administration Commission of the State Council of the People's Republic of China. Founded in 1982 and headquartered in Beijing.

Tokyo Gas 1.25 Tokyo Gas is a supplier and distributor of gas and electricity into Japan.


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Santoshaswrittenoff$7.9bnsince2014onitseastcoastCSGandLNGassetsincludingtherecentJuly2020announcementofa$976mwritedown.22

Originhaswrittenoff$4.7bnsince2014includingitsrecentJuly2020announcementofa$745mwrite-down.

ShelltookoverBGgroupin2015.Priortothetakeover,BGGroupwrotedownthevalueofitsCSGtoLNGassetsinAustraliabyUS$6.8bn(A$7.7bn).23InMay2017,Shellwroteoffafurther$1.2bnfollowingpoordrillingresults.24

InJune2020,ShellannounceduptoUS$22bninwrite-downsincludingUS$8-9bn25onitsAustralianassetsPreludeandQCLNG(itsfailingCSGtoLNGinvestment).IEEFAestimatesthatthewrite-offstakenonQCLNGareA$2.9bn.

Shell(andBGGroup)write-offsonitsfailedCSGtoLNGinvestmentstotalanestimated$11.8bn.

ThethreeleadcompaniesintheconsortiumthatownthethreeexportCSGtoLNGplantsatGladstonehavewrittenoffover$24bnsince2014ontheirfailedinvestments.

The Narrabri Project is High Cost Gas

TheaveragecostsofproductionforexistinggasfieldsontheeastcoastofAustraliaare$3.05/GJ,accordingtoCoreEnergywhowerecommissionedbyAEMO.26CoreEnergyestimatesthattheNarrabrigasproject(statedinthereportasGunnedah)willhavecostsataminimum$7.28/GJ.

Narrabrigasishighcostgasatmorethantwicethecostsofexistingfields.Itissimplynotpossibletobringdownthecostofacommoditybyproducingitatahighcost,asSantoswilldoatNarrabri.Thepropositionisabsurd.

NarrabrigashasbeenpledgedtotheSydneyconsumerbySantos.Santosisplanningtosupplythedomesticmarketwithhighcostgaswhilstexportinglowercostsourcesofgas.ItwillusethehighcostsatNarrabritojustifypricingthedomesticmarketatapremium.

Essentially,theNarrabrigasprojectwillnotbringdownthecostofgasforthedomesticconsumerasSantosclaims,norwillithavenoeffectonthedomesticmarketastheDepartmentofPlanningmaintains.

22SantosAnnualReports2014-2019plusitsJuly2020announcementtotheASX.23MiningWeekly.BGGroupreportsmassivewrite-downonAusassets.4February2015.24TheAustralian.Shell’s$390massetwrite-offcastsdoubtonCSGreserves.2May2017.25Shell.Shellsecondquarter2020updatenote.30June2020.26AEMO.CoreEnergyandResources.GasReservesandResourcesandCostEstimates.November2019.Page13.


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TheNarrabrigasprojectwillforceupthepriceofgasforthedomesticconsumer.

Santos Has Mislead the Independent Planning Commission IntheiraddresstotheIPCinJuly2020,Santosstatedthat:

“You’veseentheimpactthatwe’vehadinAustralia–sorry,inQueenslandoverthelastfourorfiveyears,wherewe’vetakendownthecostofsupplybyreducingdrillingcostsbymorethan84percentandproductioncostbymorethan36percent.Aswecontinueonthattrajectory,we’redrivingthecostofsupplydown,andNarrabriwillbenefitfromthosecost...programsandthoseefficiencyprogramsthatwe’vebeenabletoimplementoverthelastfouryearsorsotodrivethatcostofsupplydownfurther.”27

Dayslater,Santosannounceda$976mwrite-downofitsEastCoastCSGtoLNGassets.

Ifthecompanyhadmanagedtocutcostssosuccessfully,whydiditannouncesuchamassivelossofvaluewhenithadalreadywrittenof$7bnintheperiod2014-2018priortoitsmostrecentwrite-off?

Santos’claimsofmassivelyreducedcostscannotbetakenseriously.

The Effects of The CSG To LNG Industry on The Australian Economy OffarmoresignificancethanthelossesincurredbySantos,istheeffectoftheEastCoastCSGtoLNGindustryontheAustralianeconomy.

Formanyyearspriorto2014,thepriceofgasinAustraliawassteadyat$3-4/GJ.Weareoftentoldthatwemustpayexportparitypricingforgasnowthatwearelargeexporters.Nothingcouldbefartherfromthetruth.Asreport28afterreportissuedbytheACCChasshown,wepaywellabovewhatweshould.

TheACCC’sfirstinquiryintothegasindustry,theEastCoastGasInquiry2015,concludedwithareportinApril2016.29InApril2017thegovernmentdirectedtheACCCtostartanothergasinquiryforaperiodofthreeyears.InJuly2019theinquirywasextendedtoDecember2025.Itisnowessentiallyanever-endinginquirythatrepublishesthesameconclusionsagainandagain.ThegovernmentrespondswithpreciouslittleactionandcertainlynonethatmakesamaterialdifferencetothegasandelectricityconsumerontheeastcoastofAustralia.

27IndependentPlanningCommissionPublicHearingRe:NarrabriGasProject.20July2020.Page38.28ACCC.Inquiryintotheeastcoastgasmarket.April2016.29ACCC.EastCoastGasInquiry2015.22April2016.


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WearenowuptotheACCC’s9threportontheeastcoastgasindustry.Allthereportsessentiallysaythesamething:thatconsumersarebeingpricegougedbythegasindustryandarepayingmorethantheyshouldforgasonaconsistentbasis.

Figure 9: The Never Ending ACCC Gas Inquiry

Source: ACCC (https://www.accc.gov.au/publications/serial-publications/gas-inquiry-2017-2025)

Santos is Not A “Fit and Proper” Entity to Hold A Coal Seam Gas Licence in The State Of NSW SantosisnotafitandproperentitytoholdaCSGproductionlicenceinthestateofNSWasithasactivelyfloutedapprovalconditionsinthestateofQueensland.

SantosassertedintheEnvironmentalImpactStatement(EIS)foritsGladstoneGLNGplantthatitwouldnotcontributetoafutureshortageofgasintheeastcoastmarket:

“Theprojectmayinitiallysupplydomesticgasmarkets,butitisnotdivertinggasfromlocalmarketstoexportmarkets.Theproject’ssupplyofgastothedomesticmarketisuncertainatthisstage.Optionstomanageramp-upgasandanygasthatissurplustotherequirementsoftheLNGfacilityincludea


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rangeofcommercialandtechnicalpossibilities.Therefore,theprojecthasnodirectimplicationsfordomesticgasprices.ThegastosupplytheLNGfacilitywillcomefromnewlydevelopedCSGfields.TheamountofgasisverysmallrelativetotheidentifiedconventionalandCSGfieldsreservesavailabletosupplytheAustralianeastgasfields.Itisthereforeunlikelytocontributetoafutureshortageofgasinthedomesticmarket.”30

SantosmadeadditionalassertionsthatitcouldsupplytheirGladstoneexportprojectfromnewsourcesofsupply:

“AsSantosworkedtowardapprovingitscompany-transformingGladstoneLNGprojectatthestartofthisdecade,managingdirectorDavidKnoxmadethesensiblestatementthathewouldapproveoneLNGtrain,capableofexportingtheequivalentofhalftheeastcoast’sgasdemand,ratherthantwobecausetheventuredidnotyethaveenoughgasforthesecond.”

“‘You’vegottobeabsolutelyconfidentwhenyousanctiontrainsthatyou’vegotthefullgassupplytomeetyourcontractualobligationsthatyou’vesignedoutwiththebuyers,’MrKnoxtoldinvestorsinAugust2010whenaskedwhytheplanwastosanctionjustonetrainfirstup.”

“‘Inordertodoit(approvethesecondtrain)weneedtohaveabsoluteconfidenceourselvesthatwe’vegotallthemoleculesinordertofillthatsecondtrain.’”

“Butinthemonthsahead,thingschanged.InJanuary2011,thePeterCoates-chairedSantosboardapproveda$US16billionplantogoaheadwithtwoLNGtrainsfromthebeginning.”31

DespitetheofficialassurancesbySantos,bothinapprovalsdocumentsforthegovernmentandininvestorbriefings,thecompanyhasbeenunabletosupplyitsexportplantsandhasboughtgasoutofthedomesticmarketinstead.

CreditSuisseestimatedthatSantospurchased160PJoutofthedomesticmarketin2016,equivalentto27%ofdomesticconsumption.32Thepurchaseofthird-partygasforexporthasplacedtremendouspressureondomesticpricesastheACCCgasinquiryhasrepeatedlyfound.

SantoshasnotadheredtoprojectconditionsforitsGLNGexportfacilityinQueensland.ItslackofadherencehasforcedupthepriceofdomesticgasinEasternAustraliatopricesaboveinternationalprices.IthasbroughttremendoushardshiptogasandelectricityconsumersinAustralia.

SantosisnotafitandproperentitytoholdaCSGmininglicenceinthestateofNSW.

30GLNGProject.EnvironmentalImpactStatement.Chapter6.Page6.15.11 31TheAustralian.HowSantos’sleapoffaithbecamegassupplystrife.3April2017.32CreditSuisse.EastCoastGasMarket.1March2017.


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Australian Gas Consumers Pay More for Gas Than Our Asian LNG Customers

Figure 10: Spot Gas Prices in Japan, Sydney and the ACCC Netback Price

Source: Australian Energy Market Operator (AEMO), Ministry of Economy Trade and Industry (METI), The Australian Competition and Consumer Commission (ACCC)

ThechartaboveshowshowAustraliangasconsumershave,formostofthetime,paidmoreforgasthanconsumersinJapan(ourlargestexportcustomer).Foralmosttheentireperiod,wehavepaidahigherpricethantheACCCdeemsappropriate.TheACCCusesthenetbackpriceasabenchmarkforwhatweshouldbepaying.33

Theeastcoastgasindustry–orcartel-hasconsistentlypricegougedtheAustraliandomesticconsumerandourgovernmentshaveallowedthemto.ThecartelhasusedtheAustraliangasconsumertosocialiseitslossesontheexportmarkets.Cartels,

33ACCC.Gasinquiry2017-2025.3August2020.

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incidentally,areanillegalmarketstructure,asisthepricefixingthatsoclearlyoccurs.

Thecostofthegascarteltotheeconomyhasbeenimmense.Notonlyhasgaspriceditselfoutoftheelectricitysystem,exceptforverynichepeakpowerapplications,ithasalsodestroyedAustraliangasintensivemanufacturing.Gasuseinindustryhasfallen12%since2014.34

High Gas Prices Have Also Ensured High Electricity Prices on the East Coast of Australia AccordingtotheACCC,highgaspriceshaveledtohighelectricitypricesintheNEM:

“Anothermajorfactorinwholesalepriceshasbeenthesignificantshortagesincompetitivelypricedgasatatimewhengas-poweredgenerationwouldoftenbethelogicalsourceofreplacementforlostcoal-firedcapacity.Gaspriceshavedoubledortripledinrecentyears.Weestimatethatforevery$1/GJriseingasprices,thewholesalepriceofelectricityrisesbyupto$11/MWh,dependingonregionaldifferencesintheNEM.”35

Theleveragedeffectofgaspricesonelectricitypricesisprofound.Forexample,wecancompareactualgaspriceswiththemorereasonableNationalCOVIDCommission(NCCC)gaspricetargetof$4/GJ.

Inthefirstquarterof2019,wholesalecontractgaspriceswere$9-11/GJ.36Wholesaleelectricitypriceswere130/megawatthour(MWh)37andthecontributionofgasgenerationwasstrongintheNEM.GasgenerationsetsthepriceforelectricityintheNEM.Ifgaswasat$4/GJinAustraliaatthattime,wholesaleelectricitypricescouldhavebeenaslowas$64/MWhorhalfofwhattheywere.

Theeffectofinflatedgaspricesonelectricitypricesisprofound.Narrabriisexpensivegasandaswehaveshown,willraisethepriceofgasasthegascartelrecoversitshighcosts.HighgaspriceswillraiseelectricitypricesintheNEMplacingamassiveburdenontheentireeconomy,notjustgasconsumers.

34Source:AEMOseeTable135ACCC.RetailElectricityPricingInquiry—FinalReport.Pageviii.36ACCC.GasInquiry2017-2020.InterimReport.Page9.37OpenNEM.NEM.


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Tax and Royalties from The Onshore Gas Industry in Australia Have Been Notably Absent Royalties Santosclaimsthatitwillpay$1.2billioninroyaltiestothestateofNSW.38

TheIPCshouldcarefullyexaminetheexperienceofQueenslandbeforetakingthisfigureatfacevalue.SantosisaleadingplayerintheQueenslandCSGindustryandsimilarextravagantclaimsweremadebytheindustrypriortoitcommencingoperationsinthatstate.RoyaltypaymentshaveconsistentlydisappointedthestateofQueensland.TheendresulthasbeenthatQueenslandtaxpayershavefundedtheindustry.

Inthe2014Queenslandbudget,petroleumroyaltieswereexpectedtorisefrom$68min2013-14to$660mby2016-17onthebackoftheboominCSG.Theresultwasafractionoftheexpectationatjust$98min2016-17.

TheroyaltytakebytheQueenslandgovernmentwassodisappointingthattheratewasincreasedfrom10%to12.5%startingin2019-20.39

The2019-20Statebudgetstatedthattheestimatedactualroyaltytakefromthepetroleumsectorwas$450min2018-19.40Withthecrashinglobalgaspricesitislikelythatthiswillbethehighpointforroyaltycollectionforquitesometime.

TheQueenslandgovernmentwillnothaverecoveredthecostsofadministeringtheCSGindustry,roadrepair/upgradesandmaintenanceandprovisionofotherinfrastructureandservices.

TheQueenslandgovernmentrecentlyrevieweditsroyaltyregimeandon8June2020announcedthatanewvolume-basedmodelwillapplyfrom1October2020.41Theoutcomeofthisreviewishighlyuncertain.

TheindustryhasahistoryofroyaltyevasionthatshouldbeexaminedcloselybytheIPCandperceivedbenefitstothecommunityinQueenslandhavebeennon-existent.

38IndependentPlanningCommissionPublicHearingRe:NarrabriGasProject.20July2020.Page33.39QueenslandGovernment.BudgetStrategyandOutlook2019-20.Page72.40QueenslandGovernment.BudgetStrategyandOutlook2019-20.Page86.41QueenslandGovernment.QueenslandPetroleumRoyaltyReview.8June2020.


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Taxes TaxespaidbytheCSGtoLNGindustryinQueenslandhavebeenminimal.

TheAustralianTaxOfficepublishesactualtaxpaidbycorporations.Thelatestyearforthesestatisticsis2016-17.42TherecordoftaxpaidbycompanieswhohavebenefitedfromthenaturalwealthofQueenslandhasbeenverypoor.

In2016-17BGgrouppaidnotax.BGhasbeentakenoverbyShellandittoopaidnotaxin2016-17.

TheothertwoconsortiumthatownplantsatGladstoneareledbySantosandOrigin,neitherofwhichpaidtaxin2016-17,accordingtotheATO.43

TheresimplyhavenotbeenthebillionsofdollarsfortheQueenslandandCommonwealthgovernmentsthatwerepromised.

TheIPCshouldlookattheCSGtoLNG’sindustriescontributiontosocietyintermsoftaxandroyaltiesandjudgeitaccordingtoitsactualhistoryandnottheextravagantclaims,backedbyscantevidence,madebytheproponentofthisproject,Santos.

We Need the Gas for Industry The East Coast Market is Interconnected and Is One Market Theeastcoastgasmarketisonemarketconnectedbypipelines.

Theindustryconstantlywantstopushstateagainststatebysaying,forexample,thatNSWisnot“self-sufficient”ingas.Ineconomicterms,thisisnonsense.

Historically,NSWhasonlyeverbeenabitplayerineastcoastgasproduction,sourcingitsgasfromefficientandcheapsourcesintheMoomba/CooperandBassStraitbasins.

Theideathateachstateshouldproduceallitsproducts,includingenergyinsideitsownborders,runscountertoanyideaofsomestatesbeingbetteratproducingproductsthanothers.Itwillsendthisnationdownaroadtoeconomicpoverty.

42AustralianGovernment.CorporateTaxTransparency.Updated12December2019.43https://data.gov.au/dataset/ds-dga-c2524c87-cea4-4636-acac-599a82048a26/details


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For Some Applications There Are Substitutes, for Others We Need Gas Manyhighheatapplicationsforgascanbesubstitutedwithcheaprenewablepower.Somehowevercannot,andthereforeweneedsomegasproduction.

ThefederalandNSWgovernmentshavesetthelevelofgasneededat70PJpa,beingsomewhatconvenientlythesameproductionnumberastheNarrabrigasproject.

The Solution Involves Looking at Demand as Well As Supply Gasuseinresidentialandcommercialapplicationscanlargelybesubstitutedforcheaperelectricalheatingintheformofairconditioners,inductioncookingandheatpumpsforhotwater.4445

Thiswouldmakeavailableupto190PJpaandwoulddwarftheproposedcontributionfromNarrabri.46

Policy Responses Would Fix the Problems in The East Coast Gas Market GasproductionontheeastcoastofAustraliahastripledsince2014.Exportshavegonefromzerotoover1400PJyetthereisstilltalkofgas“shortages”.

Wehaveenoughgas.Theproblemontheeastcoastisessentiallyoneofpriceandmarketstructure,notshortages.

InWesternAustralia,theyfacedasimilarproblemtotheeastcoastandhavesuccessfullyensuredcheapandbountifulsourcesofgasforthedomesticgasconsumerbyimplementingadomesticgasreservation.

Ontheeastcoast,adomesticgasreserveonexistingandprospectivegasfieldswouldsolveboththesupplyandpriceproblemsbeingexperiencedinthedomesticmarket.Foramorein-depthreviewoftheeastcoastgasmarketandhowadomesticgasreservationcouldbeimplemented,pleaseseeIEEFA’sreport,“TowardsaDomesticGasReservationinAustralia”.47

44MelbourneEnergyInstitute.Switchingoffgas-AnexaminationofdeclininggasdemandinEasternAustralia.26August2015.45EnvironmentVictoria.AGas-freerecovery?NewreportshowshowphasingoutgaswillbenefitallVictorians.3June2020.46SeeTable1.47IEEFA.TowardsaDomesticGasReservationinAustralia.9July2019.


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ESG: Environmental and Social Governance OneofthelessenlighteningpassagesoftheIPC’shearingsretheNarrabriproposalwastheanswergivenbytheDepartmentofPlanningtothequestionputbyMrO’Connor:(onpage24ofthetranscript)

“MRO’CONNOR:Okay.JustaquestionfollowingonfromRichard’sdiscussionwithyoumomentsagoabouttheprecautionaryprinciple.Lookingthroughthedepartment’sassessmentreport,I’mstrugglingtofindwheretheESDprinciples–theecologicallysustainabledevelopmentprinciples–havebeenaddressedbythedepartment.Canyouleadmetowherethat’sgivensomeconsideration?”

Thisresponsewasflounderingatbest48andhevirtuallywentontosaythatESDprincipalswerethevibeofthewholereport.

IEEFAnotestheseissuesneedtobeaddressedcomprehensively.Intheinvestmentindustrywedealwiththeseissuesunderthreesimpleprincipals:Environmental,SocialandGovernance(ESG).

Environmental Issues Wewillsingleouttwoissuesforexamination,eitherofwhichwouldseetheNarrabriprojectrejected:waterandemissions.

Aswithtaxandroyaltypayments,theDepartmentseemsloathetolookjustnorthoftheborderwheretheCSGtoLNGindustryhasbeeninoperationsince2014.

Water IEEFAnotesthelackofassessmentofthedataoutofQueenslandisnegligent.Whilstgeologydiffersindifferentregions,thelivedexperience,albeitshortterm,shouldbeproperlyassessed.

InjustoneCSGbasininQueensland,theSuratBasin,122boreshaverundryasaresultofCSGactivitiesandaresubjectto‘makegood’arrangementsbyCSGcompaniesaccordingtotheQueenslandGovernmentsownOfficeofGroundwaterImpactAssessment.49Thepredictednumberofaffectedboreshasincreasedby10%inthemostrecentreport(fromthe2016estimate)to571bores.ThisisasignificantimpactonjusttheSuratBasin,orforthoseofuswithmemoriesofaregionrenownedforitsagriculturalprowess,theDarlingDowns.

48IndependentPlanningCommissionPublicHearingRe:NarrabriGasProject.20July2020.Page24.49QueenslandGovernment.UndergroundWaterImpactReportfortheSuratCumulativeManagementArea.July2019.


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ThereisadistincttimingmismatchthatisnothighlightedbyeithertheDepartmentofPlanningnortheQueenslandgovernment.ThegasindustryhasonlybeencommerciallyproducingCSGintheSuratbasinsince2006.50Productionhasrampedupsignificantlypost2014whentheLNGexportfacilitiesstartedoperation.TheCSGfieldsareexpectedtobeinoperationfor30-50years,afterwhichthelicenceswillbehandedbackandthecompaniesinvolvedwillgoandfindotheractivities.

The‘makegood’arrangementsonthe571waterbores(anumberthatonlyseemstoincreaseastimepasses)thatareexpectedtobeimpacted,onlylastwhilstthepetroleumlicenceisheldbyacompany.

Farmsdon’tlastforjust30–50years.Theygoonaslongaslifepersists.

ThewaterboresdonotrepairthemselveswhentheyhavebeenaffectedbytheCSGindustry;theyarepermanentlyimpaired.Thefarmersareleftwithapermanentlydiminishedasset.Afarmwithlesswaterisnotviable.

TheeffectsoftheCSGindustryinQueenslandclearlydemonstratethattheindustrycannot“manage”waterlossinagriculturalbores.Thisispermanentirrevocableloss.

Emissions from Gas Have Been Underestimated Nature,theeminentscientificjournal,publishedamajornewstudyearlierthisyearshowingthatemissionsofthepotentgreenhousegas,methane,fromfossilfuelproductionare25%to40%higherthanpreviouslyunderstood.51

Theresearchmeasuredmethanelevelsinicecores.Themethaneproducedbyfossilfuelextractionhasasignaturethatcanbeidentified.Bymeasuringmethaneradiocarbonfrommorethan200yearsago,whentherewerenoindustrialsources,theresearchersknewthatallfossilmethanefromthaterahadtobeemittednaturally.Theyfoundthatalmostallthemethaneemittedtotheatmospherewasbiologicaluntilabout1870.Thatiswhenthefossilcomponentbegantoriserapidly.Thetimingcoincideswithasharpincreaseintheuseoffossilfuels.

Significantly,researchersdiscoveredthelevelsofnaturallyreleasedmethanefromfossilfuelsareabout10timeslowerthanpreviousresearchreported.IEEFAnotesgasproducerscannolongerblameflatulentcattlefortheemissionstheirindustryproduces.Astheresearchersays:

“We’veidentifiedagiganticdiscrepancythatshowstheindustryneedsto,attheveryleast,improvetheirmonitoring,”saidBenjaminHmiel,aresearcherattheUniversityofRochesterandthestudy’sleadauthor.“Iftheseemissionsaretrulycomingfromoil,gasextraction,productionuse,theindustryisn’teven

50QueenslandGovernment.Queensland’spetroleumandcoalseamgas2015–16.January2017.Page5.51Nature.Preindustrial14CH4indicatesgreateranthropogenicfossilCH4emissions.19February2020.


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reportingorseeingthatrightnow.”52

Methane Venting and Leakages Methaneisthegreatestthreattothewarmingclimate.Ifgasleaksandventingaccountformorethan2%to3%ofmethaneproduced,itisworsefortheclimatethancoal.53

Withtheinstallationofmethaneleakdetectionequipmentonnewgasprojects,companiesarefacingnewchallengestonecessarilyovercome.

BPstatedthat:

“Thewiderenergyindustryleaksabout3.2%ofthegasitproduces,whichisprobablyalmostenoughtooffsetthebenefitofswitchingfromcoaltogas."54

Essentially,BPisacknowledgingthatgasisworsethancoalforgreenhousegases.ThegasindustryinAustraliamustdothesame.

The Supply Chain in Gas Thegasindustry’sclaimsoflowemissions,echoedbygovernments,arebasedonahalf-truth.

AccordingtoGISERA,thegasindustry-fundedandgasindustrycontrolled,armofCSIRO55,gasconsumeddomesticallyproduces:

• 31%feweremissionswhenburnedinanopencyclegasturbine(OCGT),commonlyknownasagaspeakingplant,or

• 50%feweremissionswhenburnedinamoreefficientcombinedcyclegasturbine(CCGT),commonlyreferredtoasagasbaseloadplant.

Combinedcyclegasturbines(CCGT)arenotalargepartoftheelectricitysysteminAustraliaforoneverysimplereason–theyareveryexpensivetorun.Gaspricesin

52Nature.Preindustrial14CH4indicatesgreateranthropogenicfossilCH4emissions.19February2020.53Page26.“Ageneralconsensushasemergedfromthesestudiesthatclimatebenefitsofnaturalgasreplacingcoalarelostwherefugitiveemissionsfromallupstreamoperationsaregreaterthan3%oftotalproduction”(Alvarezetal2012;Zavala-Araizaetal2015)inCSIROEnergy.WholeofLifeGreenhouseGasEmissionsAssessmentofaCoalSeamGastoLiquefiedNaturalGasProjectintheSuratBasin,Queensland,Australia.FinalReportforGISERAProjectG2.July2019.Thelowerlevelof2%wasbasedonashorter20-year(GlobalWarmingPotential)timeframeasopposedtothe100-yeartimeframe.SourcedfromcorrespondencewithProfessorIanLowe.54Bloomberg.BPtoInstallPermanentMethaneLeakDetectorsonNewProjects.10September2019.55GISERA.WholeofLifeGreenhouseGasEmissionsAssessmentofaCoalSeamGastoLiquefiedNaturalGasProjectintheSuratBasin,Queensland,Australia.FinalReportforGISERAProjectG2.July2019.Pageviii.


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Australiaaresimplytoohighanditisnoteconomictorunthemwhentherearecheapersourcesofpower.IntheU.S.thereisalargefleetofCCGTgaspowerstationsasgaspricesarereasonable.

IfgasistobeusedasatransitionfuelinAustralia,CCGTwouldneedtoberetiredandmoreoftheemissions-intensiveopencyclegasturbineswillbeneeded.OCGTarelessefficientbutfarmoreflexiblebecausetheycanberapidlystartedandshutdowntofillinthegapswhenrenewablepowerisdeficient.

IEEFAnotesthatthepromotionof50%lessemissionsfromgasisatbestdishonestandisdesignedtomisleadanddeceivethepublic,investorsandgasconsumers.

A Full Life Cycle Analysis Gives a Totally Different Picture Theindustry’sclaimsofgasproducing50%lessgreenhousepollutionthancoalalsofailstoconsiderafulllifecycleanalysisoftheproduct.

Australiaistheworld’ssecond-largestexporterofgas56,withthegasindustryexportingaboutthreequartersofthegasitproduces.Gasmustbeliquefiedforexportinanextremelyenergyintensiveprocessthatsupercoolsthegastominus160°C.

RobertHowarth,aleadingCornellUniversitygasemissionsexpert,saidinasubmissiontotheIrishparliamentthat:

“Toliquefyandtransportthegasrequiresasubstantialamountofenergy:toimportonecubicmeterofgasasLNGwouldrequire1.2cubicmetersofgastobeproduced,with0.2cubicmetersconsumedtoproduceandtransporttheLNG(Hardistyetal,2012,Energies,5:872-897).”57

TheenergyintensityoftheLNGprocessisbestillustratedbythefactthat17%ofthemethaneproducedisusedjusttoproduceandtransporttheLNG.Thedirectemissionsofmethaneintheshippingprocessareunknown.

Howarthexplains:

“LNGiskeptinliquidformbyallowingsomemethaneto“boiloff,”resultinginevaporativecooling.Inatypicalvoyage,2to6%oftheLNGislostasgaseousmethaneduetothisboiloff.Usually,themethaneisusedasfueltohelppowertheship,butitseemshighlylikelythatsomeisemittedtotheatmosphere,althoughIamawareofnodataonthisemission.”

56AustralianGovernment.DepartmentofIndustry.ResourcesandEnergyQuarterlyDecember2019.57 TestimonyofRobertW.Howarth,Ph.D.CornellUniversity,Ithaca,NY14853USAbeforetheJointCommitteeonClimateActionHouseofOireachtas,Ireland.9October2019.Page2.


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Heconcludesthat,takinginalltheemissionsandburningasfuel,LNGproducesmoregreenhousegasesthancoal.

Figure 11: Electricity Produced with LNG Emits More Greenhouse Gases Than Coal-fired Electricity

Source: Robert W. Howarth

Figure11showsthegreenhousegasfootprintofLNGimportedtoIrelandfromtheU.S.comparedtocoal.Emissionsofcarbondioxideareshowninyellow.Theredbarsindicatemethaneemissionsinunitsofcarbondioxideequivalents.58

BecausemostofthegasAustraliaproducesisexported,itismisleadingofthegasindustrytoclaimthatgasemits50%lessgreenhousegasthancoal.The50%figurecoversonlydomesticconsumption.Oncetheeffectsofliquefaction,shipping,regasificationanddistributionareconsidered,LNGmaywellbeamoredamagingwayofproducingpower.

58Estimationofgreenhousegasemissions:EmissionsofcarbondioxideareasreportedinHowarth’s2011paperandarebasedondatafromtheUSDepartmentofEnergy.Emissionsofmethanefromcoalareasreportedin1996bytheIntergovernmentalPanelonClimateChange.MethaneemissionsforLNGarebasedona3.5%emissionrateforshalegasintheUnitedStates,asdeterminedinmy2019Biogeosciencespaper,andtheestimateofHardistyetal.(2012)ontheamountofnaturalgasconsumedintheprocessofproducingandtransportingLNG.Methaneemissionsareconvertedtocarbondioxideequivalentsusingthe20-yearglobalwarmingpotentialof86reportedbytheIntergovernmentalPanelonClimateChangeintheir2013synthesisreport.


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Conclusion for Emissions EverystateandterritoryinAustraliahassomesortofnetzeroemissionstargetby2050.

Gasisahighgreenhousegasemittingfuel.Producingandconsumingmoregasisfundamentallyopposedtocurrentstateandterritorygovernmentpoliciesonemissions.Wemustbelookingtoreduceproductionandconsumptionofgas,notincreaseproductionandconsumptionifwearetomeetthenetzerotargets.

Social Issues CSGhasalargeenvironmentalfootprint.Itsoperationsrequireanetworkofroads,pipelinesandwatertreatmentpondsandfacilitiesthatmayormaynotbeonprivateland.AstheindustryexpandsoutofthePilligaforestandontomoreagriculturalland,theneedforasociallicencetooperatebecomesevermorepressing.

IEEFAdoesnotneedtoremindtheIPCthattheNarrabrigasprojectisoneofthemostopposedprojectsinthehistoryofplanninginNSW.Anylargeresourceproject,thatinthefullnessoftimewillbeneedingmoreaccesstoprivateland,needsbroadsocialacceptance.

Santos’Narrabrigasprojectdoesnothavebroadsocialacceptance.Rather,ithasbroadsocialopposition.Thesheernumbersofopposingsubmissionstotheprojectshowthis.

Governance Issues TherearethreepertinentissuessurroundinggovernanceandtheNarrabrigasproject.

ThesciencesurroundingthegasindustryisconductedbytheGasIndustrySocialandEnvironmentalResearchAlliance(GISERA),aspecialpurposearmofCSIRO.GISERAisfundedbythegasindustry.Ithasfivegasindustryexecutivesonitsboardofninevotingmembers.Thereisaclearconflictofinterest.

Theminingapprovalsprocessitselfisdeficientandnotfitforpurpose.Theprocesswasdesignedformineswhicharelocatedinoneposition.CSGisamulti-stageddevelopmentthatspreadsoutfromitsinitialapprovaltocoverlargetractsofland.OneonlyhastolookatQueenslandtoseethisoccurring.

TheIPCisonlylookingatstageoneofamultistagedevelopment.Itisonlyassessing840wellsinthePilligaforest.YetSantosholdspetroleumlicencesovermuchofnorthwestNSW.Itisclearlytheirintentiontodeveloptheselicencesonprimeagriculturalland,otherwisewhywouldtheyholdthem.Ifapprovalforstageoneisgiven,approvalsforstages2,3,4etcareeasilyrubberstamped.Thecumulativeeffectsofthestagesarenotassessed.


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CSGshouldhaveadifferentapprovalsprocessthattakesintoaccountthestagednatureofthedevelopmentandthecumulativeeffectsofthestages.

TheNSWchiefscientists’16recommendationsonthesafeoperationoftheCSGindustryhavenotbeenfullyimplemented59despitethembeingreceivedbygovernmentsomesixyearsagoinSeptember2014.60

Thegasindustryandthegovernmentcannotclaimsafeoperationuntilall16recommendationshavebeenfullyimplemented.Indeed,toproceedtoapproveNarrabriintheabsenceofsuchoversightwouldbeextremelyreckless.

59NSWParliament.TheimplementationoftherecommendationscontainedintheNSWChiefScientist’sIndependentReviewofCoalSeamGasActivitiesinNewSouthWales.February2020.60NSWGovernment.ChiefScientistandEngineer.IndependentReviewofCoalSeamGasActivitiesinNewSouthWales.


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About IEEFA TheInstituteforEnergyEconomicsandFinancialAnalysisconductsresearchandanalysesonfinancialandeconomicissuesrelatedtoenergyandtheenvironment.TheInstitute’smissionistoacceleratethetransitiontoadiverse,sustainableandprofitableenergyeconomy.www.ieefa.org

About the Author Bruce Robertson

EnergyFinanceAnalyst–Gas/LNGBruceRobertsonhasbeenaninvestmentanalyst,fundmanagerandprofessionalinvestorforover35years.Hehasworkedformajordomesticandinternationalinstitutions,includingPerpetualTrustees,UBS,NipponLifeInsuranceandBT.BruceisanactiveparticipantinthenationaldebateonenergyissuesinAustraliaandhasbeeninvitedtopresenttoanumberofgovernmentenquiriesintotheelectricityandgasindustries.

Documents

The Narrabri Gas Project - Submission to Independent ......2020/08/10 · The clear established global trend is towards more renewable power in electricity systems, and less gas