Economic modelling suggesting Santos’ Narrabri Gas Project would reduce gas prices is based on cost estimates from Santos itself, not independent analysis from the Australian Energy Market Operator (AEMO) as claimed by Santos.
If the independent production cost estimates commissioned and published by AEMO in February this year are used, rather than the figure supplied by Santos, Narrabri gas is far more expensive than gas it would displace from the Cooper Basin currently supplying well over 50 percent of NSW demand. As a result, it is likely to lock in higher gas prices for NSW customers.
The Australia Institute has today published its review of the last-minute modelling, which was published just prior to the closing of public submissions.
- Santos cost assumptions of $6.40 per gigajoule (GJ) are far lower than those published by AEMO of $7.28-9.36/GJ.
- Under AEMO’s estimates the Narrabri project could increase NSW gas prices. This is because it is far more expensive than gas from the Cooper Basin it would displace that currently supplies over 50 percent of NSW demand.
- Under AEMO’s estimates the project would only be viable with government subsidies.
- Santos’ own accounts value the project at zero, while the company’s latest submission to the NSW Independent Planning Commission values the project at $2 billion.
- Santos’ claims of increased project-related employment are based on an economic model that assumes unemployment remains at COVID19 crisis levels throughout the 25 year life of the project.
“Santos’ whole argument that the Narrabri Gas Project would reduce gas prices rests on the surprisingly low AEMO production cost estimate of $6.40 GJ used in their last-minute economic modelling,” said Mark Ogge, Principal Adviser at the Australia Institute.
“So it was no surprise to find that the estimate had been supplied to AEMO by Santos themselves.
“In fact, AEMO published a detailed, rigorous independent estimate of gas production cost that gives a far higher estimate of the cost of Narrabri gas than the figure supplied by Santos.
“If AEMO’s independent published cost estimate is used, then the results are turned on their head. Narrabri gas is far more expensive than the Cooper Basin gas that it would displace.
“This means that instead of reducing gas prices for NSW, it is very likely to increase them. Industrial customers should be very concerned about this project.
“The Narrabri Gas Project will have precisely zero effect on preventing potential gas shortfalls unless LNG exports are capped at near current levels. This is because the interconnected east coast gas market is connected to massive export terminals in Queensland and any additional gas can be exported.
“Santos’ own accounts value the project at zero, while the company’s latest submission to the NSW Independent Planning Commission values the project at $2 billion. Both can’t be correct. If the value of zero in Santos’s annual report is correct, then the project will not have a net benefit and should not be approved.
“While Santos’ new modelling ignores the impact of the pandemic on gas prices, its newly inflated jobs claims are based on an assumption that covid-related unemployment levels go on to 2046.
“It is clear that the economics of the Narrabri Gas Project do not stack up – Santos’ own accounts say as much.
“The benefits of the Project have been overstated and the costs understated in every economic analysis Santos has submitted.
“It is time for the Independent Planning Commission to reject this project that has risks for water resources, the climate, the taxpayer and Santos shareholders.”