PERTH (miningweekly.com) – Energy analyst EnergyQuest has warned state governments from investing in the proposed gas pipeline which would connect the Northern Territory to markets on the east coast of Australia, saying that it would hinder private investment.

In November this year, the Northern Territory government called for expressions of interest in building and operating the pipeline, known as the North East gas interconnector.

The project has been granted Major Project status by the Northern Territory government, and two possible routes have been proposed; one from Tennant Creek to Mt Isa, in Queensland, and the other from Alice Springs to Moomba in South Australia.

It is estimated that the Northern Territory has more than 200-trillion cubic feet of unconventional gas resources in six onshore basins and 30 trillion cubic feet of conventional offshore reserves.

EenrgyQuest CEO Dr Graeme Bethune said on Monday that government-backed investment into the proposed pipeline would be counter-productive, and could kill the increasing batch of private sector initiatives being evolved to increase east coast domestic supply, often in collaboration with gas buyers.

“These initiatives are a positive development as we still see an emerging gap between demand and supply along the east coast with negative end-user consequences,” Bethune said.

“They would be endangered if governments underwrite a pipeline from the Northern Territory. A privately funded initiative that increases east coast supply would be a useful addition but governments should be wary of direct support for such a project. Rather they should focus on speeding up approval processes and removing regulatory hurdles.”

Meanwhile, Bethune has predicted that the recent collapse of the oil price was unlikely to immediately impact the slew of liquefied natural gas (LNG) projects being developed across Australia.

Some seven LNG projects were expected to come on-stream within the next 18 months.

“The seven LNG projects have contracts they have to fulfill so they need to ramp-up as quickly as possible to start earning cash so there is unlikely to be a slowing down of development,” Bethune said.

“The lower oil price will flow on to lower LNG prices and lower returns on Australian projects. However, it is unlikely that any LNG project was sanctioned assuming $100/barrel oil prices.”

Despite the optimism, Bethune noted that the industry was, however, reducing capital spend.

“Industry costs went up with the higher oil price and now need to fall with the oil price.”