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.