Santos Accused of 'misrepresenting' Costs of Narrabri Gas in New Modelling

Santos has been accused of misrepresenting the source of estimates of the costs of its proposed Narrabri gas project, in which it was suggested the project could produce gas at costs lower than had been stated previously.

Santos is seeking planning approval for the Narrabri gas project, which is currently being considered by the NSW Independent Planning Commission. The project has attracted strong opposition from both environmental groups and researchers, who say the project will make a massive contribution to Australia’s greenhouse gas emissions, while having little impact on domestic gas prices.

Just prior to the closure of submissions on the Narrabri gas project, Santos dumped a large amount of documentation, including what it claimed to be updated economic modelling of the gas project, in what some groups have claimed was a deliberate strategy to deprive community and environmental groups the opportunity to respond to the new information.

The new documentation included economic modelling completed by consultancy ACIL Allen and Core Energy, which incorporated a cost of production assumption for the Narrabri project that was substantially lower than estimates previously provided by Santos, and which Santos said had been published by AEMO.

A new report from The Australia Institute think tank says that this information was sourced by AEMO, but in fact had originally been sourced from Santos.

“ACIL Allen present these production and delivery figures as based on analysis by Core Energy Group and published by AEMO. This is not the case. In fact the figure was supplied by Santos to AEMO and contradicts Core Energy Group analysis,” The Australia Institute report said.

The updated economic modelling provided by Santos included a new assessment of the production costs for the gas produced by the project at $6.40 per gigajoule, but TAI has says the likely cost of production will be substantially higher.

“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,” principal adviser at the Australia Institute Mark Ogge said.

“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.”

In a submission to the NSW Independent Planning Commission, the Australia Institute says that AEMO has actually estimated the cost of gas production at the proposed Narrabri project would be as high as $9.36 per gigajoule, and the project would deliver virtually no benefit to domestic gas prices.

“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,” Ogge added.

“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.”

A spokesperson for Santos said that the documentation provided to the Independent Planning Commission was made in good faith, and said that the cost estimates the company had provided AEMO were a more accurate assessment of the project’s costs.

“None of the cost estimates are assessed by AEMO, which relies on estimates from consultants to build their supply outlook. In this case, Santos provided AEMO directly with actual modelled data for the cost of production to replace the less accurate, out of date consultant estimate,” the Santos spokesperson said.

“Santos’ 10 August submission was made in good faith and out of respect to the various submitters who raised concerns during the public hearing.  As the project proponent, we provided our explanation in response to those concerns for consideration by the IPC Panel and the submitters themselves.”

The NSW Independent Planning Commission ultimately sought to extend the consultation process by a further week and is now expected to deliver its final planning decision on the Narrabri project by 30 September.

Source: Santos
Date: Aug 24, 2020