Submission on Arrow Energy’s Gladstone LNG Plant proposal

by Matt Grudnoff

Arrow Energy plans to build a Liquefied Natural Gas (LNG) plant in Gladstone to export coal seam gas (CSG) from its reserves in the Surat and Bowen Basins. This construction project is proposed to occur at the same time as a large number of other projects in Gladstone such as the Yarwun Alumina Refinery Expansion, the Gladstone LNG Project, the Queensland Curtis LNG Project as well as many other mining projects in the local region.

It is also proposed to occur during a larger mining boom in Queensland and Australia with the Federal Budget 2012-13 estimating investment of $120 billion in the resource sector in 2012-13 and a resource investment pipeline totalling $450 billion.

Arrow’s LNG project will no doubt be very profitable to its foreign owners Royal Dutch Shell and PetroChina and to those people fortunate enough to be employed by Arrow either directly or indirectly. Balanced against these small numbers of winners are a large number of losers. Arrow’s Economic Impact Assessment (EIA) does make an attempt to show some of the negative effects that the LNG project will have on the Gladstone region, Queensland and Australia. The negative effects in the EIA include:

• The loss of 1,600 jobs across Queensland and Australia; 1,000 in Manufacturing

• $441.5 million of manufacturing activity will be lost

• Upward pressure on inflation

• Small and medium sized businesses will be hit with higher bills for payroll and rent. This could result in some of them shutting down

• Housing affordability will decline for those not employed in the new LNG plant

• More upward pressure on exchange rates

• Adding to existing skill shortages.

Arrow’s LNG project will involve two separate construction phases. The first construction phase will occur from 2013-14 to 2016-17 and then a second construction phase from 2022-23 to 2024-25. This will have the effect of creating a yoyo economy. During the construction phases thousands of mostly Fly in Fly out (FIFO) workers will descend on Gladstone. During the non-construction phases only around 450 operational workers will be required. This will create large spikes in demand that will be followed by large falls. This is likely to create further dislocation in the local economy.

When taking into account the current economic conditions and looking at the effects that the project is likely to have on the Gladstone, Queensland and Australian economies, this paper concludes that there is no economic case for this project to proceed. The project is likely to make worse economic pressures that are already weighing down the economy and will produce minimal broad economic benefits.

Full report