Like what you've read?

On Line Opinion is the only Australian site where you get all sides of the story. We don't
charge, but we need your support. Here�s how you can help.

  • Advertise

    We have a monthly audience of 70,000 and advertising packages from $200 a month.

  • Volunteer

    We always need commissioning editors and sub-editors.

  • Contribute

    Got something to say? Submit an essay.


 The National Forum   Donate   Your Account   On Line Opinion   Forum   Blogs   Polling   About   
On Line Opinion logo ON LINE OPINION - Australia's e-journal of social and political debate

Subscribe!
Subscribe





On Line Opinion is a not-for-profit publication and relies on the generosity of its sponsors, editors and contributors. If you would like to help, contact us.
___________

Syndicate
RSS/XML


RSS 2.0

Not all gases are the same

By Stewart Taggart - posted Wednesday, 5 December 2012


The costs of building LNG plants in Australia rises by the month.

What's going on?

For their part gas industry executives finger phantoms: poor productivity, government regulation, stroppy greenies etc. etc.

Advertisement

By making life hard for LNG, they say, the costs of LNG projects in Australia are rising, they say.

A better answer, however, is this: LNG is a bad, uneconomic deal for Australia. Pipeline gas exports to Asia would be cheaper. That's what prices are saying.

Roughly $160 billion of LNG plants are now planned for Australia. That's roughly 16% of GDP. By the time you read this, prices probably will have risen again.

The goal of all this LNG infrastructure will be to export roughly 55 billion cubic meters per year of Australian natural gas to China, Japan and South Korea.

Here at Grenatec, we estimate a natural gas pipeline of equivalent capacity could be built between Australia and North Asia for between $125-200 billion -- depending on topology.

We reach our figures by analysing prices of comparable natural gas pipelines elsewhere. These include Langeled in the North Sea, Nordstream in the Baltic Sea and the proposed Trans-ASEAN Gas Pipeline in Southeast Asia.

Advertisement

These show isn't Australia isn't some idiosyncratically high-priced economy. Australia's productivity, regulation and greenies are no different than elsewhere.

What's different is that Australia's gas industry is ignoring what prices are now trumpeting: LNG is a bad long-term economic deal.

There's two reasons for this.

The first: LNG's carbon footrprint is horrible. The arrival of carbon pricing is exposing this. That's driving up LNG project costs. All quite rational.

The second: LNG has a finite, short-term economic lifespan. Building inefficient, short-term infrastructure IS expensive. Rising LNG plant prices merely reflect these dead-end economics.

LNG requires compressing feedstock natural gas 600 times so it can be shipped to in special, single-purpose tankers for decompression and pipeline delivery at the far end. All this is energy intensive. This creates greenhouse gases -- lots of them.

US researchers have totted up these emissions. They've concluded natural gas shipped to market as LNG for eventual combustion at customer-end gas plants creates 'life-cycle' greenhouse gases HIGHER than that of coal.

Therefore, LNG takes us backwards in battling climate change. LNG project prices are reflecting this. That's what prices do.

The next problem is technological.

In the transition to a clean energy future, efficient, flexible, adaptable, future-proof, long-term infrastructure is needed.

LNG is none of the above. Pipelines are all of the above.

Given that natural gas will give way to renewable energy (like solar and wind) as well as biofuels, hydrogen and even carbon and storage -- pipelines are much better suited to this energy future than LNG.

Pipelines can carry hydrogen, biofuels and waste carbon. That makes them flexible and adaptable. THAT has future value. It's this 'call' option value that's now being reflected in the attractive relative pricing of pipelines vs. LNG.

In other words, the estimated $160 billion of LNG infrastructure now either under construction or planned in Australia will be written off in just a few decades. Unrepurposable for other energy sources, it will leave behind industrial blight, unemployment and environmental degradation. That's what's pushing up LNG project prices in Australia. We need to heed those market signals.

The transition to a low-emission, clean energy future will take a long time. What's needed is long-term infrastructure of enduring economic utility.

For natural gas, that means pipelines. For Australia, that means building a national natural gas pipeline network. For Australian exports of natural gas, that means building pipelines stretching northward to China, Japan and South Korea.

As this is done, fiber optic cables and high-capacity power lines could be laid alongside, compounding the benefits.

The end result is a Pan-Asian Energy Infrastructure that could serve both Australia and Asia well into the 21st Century. We've seen this movie before. And it ended well. It was called the Internet Revolution. We've all gained from it. It's now the energy industry's turn.

Paying attention to relative pricing in the coming era of carbon pricing represents smart economics in the Asian Century.

  1. Pages:
  2. 1
  3. 2
  4. 3
  5. All

To read more, download Grenatec's two studies "Pan-Asian Energy Infrastructure" (http://www.grenatec.com/dl/grenatec.paei.pdf) and "Pan-Asian Gas Pipeline" (http://www.grenatec.com/dl/grenatec.pagp.pdf)



Discuss in our Forums

See what other readers are saying about this article!

Click here to read & post comments.

20 posts so far.

Share this:
reddit this reddit thisbookmark with del.icio.us Del.icio.usdigg thisseed newsvineSeed NewsvineStumbleUpon StumbleUponsubmit to propellerkwoff it

About the Author

Stewart Taggart is principal of Grenatec, a non-profit research organizing studying the viability of a Pan-Asian Energy Infrastructure. A former journalist, he is co-founder of the DESERTEC Foundation, which advocates a similar network to bring North African solar energy to Europe.

Other articles by this Author

All articles by Stewart Taggart

Creative Commons LicenseThis work is licensed under a Creative Commons License.

Article Tools
Comment 20 comments
Print Printable version
Subscribe Subscribe
Email Email a friend
Advertisement

About Us Search Discuss Feedback Legals Privacy