Mon, Jul 23, 2012 - Page 15 News List

Australia poised to usurp Qatar as No. 1 LNG source


Gas flares up at the Woodside-operated North West Shelf Venture on the Burrup Peninsula in the north of Western Australia on June 17, 2008.

Photo: AFP

Australia is set to become the world’s biggest liquefied natural gas (LNG) producer, with analysts predicting it will overtake Qatar by 2020 as it unlocks reserves that could last more than a century.

Seven of the world’s 10 major LNG — natural gas that has been cooled to liquid state to make it practical for transportation — projects are under construction in Australia, with A$176 billion (US$183 billion) of private Australian and foreign investment in gas projects since 2007.

“The projects already under development will take us ahead of Qatar. It’s just a case of when that happens,” Wood Mackenzie analyst Chris Graham said.

Analysts expect Australia to pip the small Gulf emirate, which holds the world’s third-largest gas reserves and last year saw LNG production capacity rise to 77 million tonnes per annum (mtpa), by 2020.

However, the Australian government is hoping it reaches the target sooner, with China’s demand for LNG growing by almost one-third last year, while India’s import capacity was projected to triple by 2015.

Australia is already the fourth-biggest source of LNG in the world, with three export operational projects: Western Australia’s North West Shelf and Pluto projects, and Darwin LNG in the Northern Territory.

Indonesia and Malaysia are the second and third-largest sources.

Yet based on projects that are already committed or under construction, Australia’s LNG exports — of 18.9 million tonnes per annum worth A$11.1 billion last year — are expected to hit 63 million tonnes per annum by 2016 to 2017.

Beyond these, there is a suite of other proposals that if developed could increase output above 100 million tonnes per annum, and potentially position Australia as the world’s largest LNG exporter by the end of the decade.

“By 2017, based on proposed and committed new projects, Australia’s LNG production capacity is projected to quadruple,” Australian Resources Minister Martin Ferguson said.

Australia’s abundance of natural resources and proximity to commodities-hungry Asia helped the economy avoid recession during the global financial crisis, thanks to exports of coal and iron ore.

Macquarie Securities analyst Adrian Wood said Australia was likely to overtake Qatar by 2020, but only just, with strong competition from the US and also potentially parts of Africa.

Canberra expects LNG exports to expand rapidly as developing countries enjoy economic growth and move away from using coal to gas for electricity generation.

“Natural gas is increasingly the fuel of choice for developing economies because of its versatility and lower carbon emissions compared with other fossil fuels,” Ferguson said this month.

He also noted the challenges of providing adequate skilled labor and the infrastructure needed to deliver projects that export LNG.

An Australian Bureau of Resources and Energy Economics report released this month noted that: “The principal challenges for Australia’s LNG export sector is that projects have relatively high costs, slower construction times and larger capital expenditure.”

The costs, partly due to the remote locations of offshore gas fields, have lumped some Australian projects with capital costs of about A$3 billion to A$4 billion per million tonnes of annual capacity — well above recent projects in Papua New Guinea and Angola, the report said.

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