Natural gas not viable option: second consultant

Ashley
Ashley Fitzpatrick
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Government offers analysis of consultant’s report in support of findings

The provincial government has released a report — which rejects the findings of another report, which commented on the findings of a report — on whether or not natural gas is a preferred option for meeting the province’s future energy needs, when compared with the Lower Churchill hydro development.

The provincial Department of Natural Resources backed its minister’s comments and its own consultant’s work Monday, releasing a three-page analysis of the costing of natural gas options, as found by a second consulting firm.

Ziff Energy Group submitted a report to the government Oct. 30, offering a rough costing of various ways of using gas from offshore Newfoundland as a power source for the island.

On Friday, that work was challenged by businessman Cabot Martin during a news conference hosted by 2041 Energy Inc., a group opposed to the Muskrat Falls project.

Martin accused Ziff of over-estimating costs by as much as 50 per cent at times. He said there is an option, using a pipeline and gas from the White Rose field, that would cost $3.7 billion — less than half the estimated cost of building a dam at Muskrat Falls and related transmission lines.

“Just as important, the offshore facilities, the pipelines to shore and onshore and the onshore LNG facilities, which represent over 80 per cent of the total $3.66 billion cost, can be built, owned and financed by the private sector without undermining Hydro’s traditional mandate and without burdening the public or ratepayers’ purse,” Martin stated in his own assessment.  

Now, the provincial government has fired back.

“Mr. Martin’s analysis is inaccurate. For example, the suggestion that natural gas is a significantly lower cost than Muskrat Falls and that the costs suggested by Ziff Energy are too high are inaccurate,” minister of Natural Resources Jerome Kennedy stated in a news release.

“Nowhere in Mr. Martin’s review does he reference the costs for fuel, operating and maintenance, the rate of return, the costs of financing and the time value of money. For critics to outright disregard the work of an internationally recognized energy group, and attack not the facts contained in their review on natural gas, but rather their credibility and ability to conduct an independent analysis, is irresponsible.”

If anything, according to a followup report by consultants at Wood Mackenzie, released with Kennedy’s comments, Ziff underestimated the costs associated with natural gas options.

For example, “Ziff assumes the cost for a gravity based structure to manage gas production would be between $1.5 and $2.4 billion. Nevertheless, we expect costs would be right at the top end of Ziff’s estimated range, and expect $2.5 billion to be a more representative conservative estimate,” the Wood Mackenzie team states.

The issue of having to negotiate for use of the offshore gas, with Husky Energy and other offshore operators, was also raised.

Wood Mackenzie stated gas production would have to be incentivized in some way in order for the oil companies to come on board.

The provincial government has posted the new, three-page document from Wood Mackenzie at www.powerinourhands.ca.

Having taken a first look, Martin told The Telegram he took little comfort in the document.

“I am going to take my time and read the Woods Mackenzie report before commenting in detail,” the president of Deer Lake Oil and Gas stated in an email.

“However, at first reading it is apparent that Woods Mackenzie’s terms of reference were restricted to checking Ziff in respect of the same three low flow/high-cost cases to which government limited Ziff.”

A spokeswoman with the Department of Natural Resources said the Wood Mackenzie report was completed following receipt of the Ziff report, but prior to Martin’s statements last week.

The cost of the assessment was not readily available.

 

afitzpatrick@thetelegram.com

Organizations: Department of Natural Resources, Energy Inc., Husky Energy The Telegram

Geographic location: Newfoundland, White Rose, Muskrat Falls

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Recent comments

  • stevie wonder
    December 03, 2012 - 18:26

    If for no other reason, the economics of a renewable, theoretically and for all practical purposes, perpetual power option development as opposed to a non-renewable option is clearly a better option for me! Its analagous to opting for a heat pump instead of an oil furnace? Only the upfront costs in the case of Muskrat Falls are much, much more competitive if you take the long view!

  • Lonewolf
    November 27, 2012 - 15:58

    Natural gas has been on a sharp decline for about 2 or 3 years so why someone would say it is going up clearly shows a lack of research. It was over $12 a cubic metre 3 years ago and now it is just over $3 a cubic metre and North America has an abundance of it and if the NL Gov. would issue on land licenses in other parts of the province instead of being greedy and keeping it only in St. Johns then we may be able to survive and share the wealth.

  • Shawn
    November 27, 2012 - 15:22

    Why should we accept numbers provided by a government that based their last budget on oil prices that hadn't been seen in the last budget year? If they over estimated this, they sure can and will over estimate the cost of alternatives to the MF project.

  • Berk Hayman
    November 27, 2012 - 12:21

    Natural gas prices are rising yearly over here (N.S.)It's scarey to think of this happening if NL goes with gas!Another Quebec gouging?

  • david
    November 27, 2012 - 11:01

    That this $12 billion debacle-in-progress is still, to this very moment in time, framed in the ultimately useless, totally BS context of Liberals vs. Conservativves is so very, very, very tellign of this hoplessly backwards place. We are stepping off a gigantic cliff to our collective financial deaths, and all anyone can scream out is their "party's" lines and slurs ... this is truly our insane, ridiculous fate.

    • John Smith
      November 27, 2012 - 12:50

      So Davey...you just added 6 billion dollars on to our costs for this project. Yet you say others are not credible? You double the cost of the project, without a shred of proof, evidence or fact. All your posts are the same...you do not debate the merits of Muskrat falls...you just attack people for posting their opinions. If you have proof that we will not pay the 6.2 billion, but will pay 12 billion whjy don't you share that with the rest of us? If you have proof of a lower cost alternative then share that with us? If you can prove we don't need the power trhen share that with us? How about one comment from you about the project that you can back up? I dare you to post a comment that doesn't concern another poster, and has proof to back up your claims...I dare you...l

    • david
      November 27, 2012 - 13:19

      No one in their right mind believes for one second that this thing would come in anywhere in the nearest galaxy to $6 billion. Add a standard 50% minimum for a combination of governemnt oversight incompetence and screw-the-government contractor shenanigans, and another 15% for unionized laour "surprises" 00---- that's for starters. That you don't perceive such blatant realities shows your blind, ignorant, partisan, stupidity. To be blunt, you're a complete bag-lugging imbecile whom, IMO, is nothing short of a cancer to Newfoundland's best interests.

  • roy
    November 27, 2012 - 09:04

    Same old Lib tactics, nothing will be right unless it serves them. He couldn't name his experts and has no figures to support him. So group o 2041 go away you are becoming a NL joke. This must be a deal you are afraid off because you have Russell and his group in ottawa, the group of2041 making fools of themselves and Mr Cabanna in the court in NL. I haven't heard from Mr Grimes and his sidekick Mr. Dumeresque lately except for the Cab ride with Snook a well known comedian.

    • LibLOL
      November 27, 2012 - 09:27

      Calling Cabot Martin, former policy adviser to Peckford, a "Lib". Now I've heard it all.... Cabot Martin demonstrates the split in the PC party, and they don't like it one bit. Wood Mackenzie must have reviewed Ziff's and Cabot's reports for what, a solid day or two? This is a joke. "We will pay you to validate the Ziff report." Give me money and I can validate any report.

    • Happily Retired
      November 27, 2012 - 10:21

      Brian Peckford and his cronies left a long time ago with their tails between their legs, leaving the province in a mess. It's time for them to drop their petty jealousies of Danny Williams and Kathy Dunderdale. They're starting to remind me of the old Liberal Reform Party of Joey Smallwood. Nothing to add, but still power hungry.

  • John Smith
    November 27, 2012 - 08:04

    Cabot...don't go away mad.....just go away...

    • david
      November 27, 2012 - 09:00

      John Smith: Please heed your own advice......and you can ignore the first part if you like.

    • Robb
      November 27, 2012 - 09:21

      Hey David, why so glum......when John is right, he is right........we don't want Cabot to go away mad.........I mean really, what next.......it is like my morning laugh to see what else they can come up with...........they must be up nights and have teams of screen play writers to come up with this crap........really, it is to the point now where people are believing the gov't and paying less attention to the liberal and ndp jabs, as they are looking like sooky little children who want to take their ball and go home.........hey liberals and ndp, now looks like a great time for a rest....kick back, take the shoes off and have a break....we deserve it.

    • david
      November 27, 2012 - 09:42

      Robb clearly subscribes to " the enemy of my enemy is my friend" philosophy. Newfoundland at its very best.