The economic case for the $800 million North East Gas Interconnector pipeline is being questioned in a report to be released on Thursday which says the gas delivered through the line will be too expensive for east coast buyers.

The lack of customers for the project other than the foundation customer Incitec Pivot has already seen the size of the pipeline reduced, and underscores that it is not needed, the Institute for Energy Economics and Financial Analysis, known for its anti-fossil fuel stance, says in the report.

NT Chief Minister Adam Giles and Jemena MD Paul Adams said the pipeline will spur the NT gas industry. Credit:Glenn Campbell

The NEGI pipeline is set to run between Tennant Creek and Mount Isa, connecting the Northern Territory into the eastern states gas grid for the first time. It is being built by China-controlled Jemena, which won the contract to built the line late last year in a NT government-run process.

The line would be able to supply NT gas to the LNG export projects in Queensland but the glut in the global LNG sector means the Queensland gas export industry is running at a loss, IEEFA says. It concludes that the pipeline project has been conceived to compensate for a "poor decision" by the NT government utility Power and Water Corporation to over-contract on its gas supplies, given gas from PWC will provide the foundation volumes to be transported through NEGI.