PIPELINES AND PIPEDREAMS

Abstract

There is little Australian experience to work on but the available evidence indicates that the capital cost of installing pipelines in Australia is well in excess of the cost of building similar size lines in the United States. The terrain in which the line is being laid is an important factor in total cost.

The costs of operating a gas pipeline are essentially determined by the cost of installation of the line and the cost of the funds used. The first of these factors is largely outside the control of the operator although it does have some discretion in areas such as the source of the pipe to be used. The cost of the funds used in a project is dependent on the status of the owner and while private pipeline owners have tended to be low cost borrowers, government bodies should be able to obtain better rates of interest. However, the source of government funds is limited and the allocation of these funds should be determined by suitable tests of social and economic benefits.

Given the capital and financial costs of a pipeline the unit cost of transporting gas is a direct function of throughput and the variation in that throughput.

Even under generous usage assumptions, the pipe which is projected to join the North West Shelf to the East Coast will not be economic for many years. Provision of funds from consolidated revenue and other devices will not reduce the costs but merely divert them to taxpayers. Pipelines to some of the more remote areas will probably never be economic.