CANBERRA: Plans to build a gas pipeline from Western Australia to the east coast, which Malcolm Turnbull has labelled “an opportunity”, are unlikely to fly because it would be cheaper to ship it around the country as LNG, analysts say. In a report to clients yesterday, Ord Minnett said a 3000km pipeline from Dampier to the Moomba gas hub in South Australia would cost more than $5 billion and would deliver gas to Sydney at a cost of $13 a gigajoule, which is well in excess of current prices. “We believe an LNG import terminal, whether it gets gas from WA, the US, or on the Asian spot market, would make more economic sense,” Ord Minnett said.
The report lines up with comments from Woodside Petroleum chief Peter Coleman that it costs three times more to pipe gas from Queensland to Victoria than it does to ship it as LNG from the Pilbara to Sydney (although his comments related to pipeline reform being needed). It also means AGL’s study of building an LNG import terminal in Sydney, Melbourne or Adelaide looks a better option. The pipeline idea was flagged in an interview with The Australian earlier this month by former WA premier Colin Barnett as a potential solution to soaring east coast gas prices brought about by the construction of $80 billion LNG plants at Gladstone. Credit Suisse analyst Mark Samter agreed with the Ord Minnett analysis, saying a pipeline from the west would add about $4 per gigajoule of pipeline costs, making it more expensive than LNG.
Building a new pipeline from WA is not the only way to get offshore West Australian gas into the domestic market. When Jemena’s planned Northern Gas Pipeline from Tenant Creek to Mt Isa is complete in 2018, it will hook up Darwin with east coast markets. Last year, Inpex said the pipeline it is building from the Browse Basin off WA to Darwin as part of its $US37bn Ichthys LNG project would have spare capacity that could allow development of other fields and provide access to east coast markets if economics supported it.
