North Australia Digest – 11/12/201211 December 2012
Australia’s push to become the world’s leading exporter of liquefied natural gas threatens to lead to higher prices and a shortage of supplies locally. Demand from proposed projects may exceed the capacity of pipelines to supply sufficient gas to meet the requirements of both export and domestic markets. While there are sufficient gas reserves to meet these demands for LNG, many reserves are not developed quickly enough, which could see supply shortfalls by 2016.
Macquarie Bank analyst Adrian Wood says Australia’s LNG projects are becoming increasingly uncompetitive and the “window of opportunity for new developments may have already closed”. This view contradicts the expectation that Australia could become the leading LNG producer in the world. According to Mr Wood, many of Australia’s projects are over budget, behind schedule and a long way from being complete, saying they have “provided scant reward for the considerable development risks endured”.
Senior Japanese diplomat Masahiro Kohara is pushing for more infrastructure spending in Darwin in an effort to develop the city as a gateway to Asia, labelling it the most promising Australian city in the Asian century: “I think it has huge potential to be a much stronger hub to connect the entire Australian economy with Asia” . This comes as Japan increases its reliance on Australian gas for energy supplies as an alternative to nuclear power and costly renewable energy. “Liquefied natural gas is very economical… We need gas to assist Japanese manufacturing,” Mr Kohara said.
The Australian Financial Review
Woodside Petroleum’s Browse Basin gas hub has
hit another setback with the WA government bungling the land acquisition process. Brendon Grylls, the state Regional Development Minister, said the process would have to start fresh, admitting “this is very disappointing and embarrassing for myself personally.”
An Australian Energy Market Operator report says Australia will face rising gas prices and a domestic gas shortage within four years if new reserves are not opened up for production. The AEMO report, released today, also said that falling demand for power will result in a halving of investment in electricity generation over the next 20 years. The report said “the economic downturn, changing habits and the carbon tax” were mostly to blame.
In an effort to improve productivity in the face of increasing pressure to meet new targets, staff at Chevron’s Gorgon LNG project – Australia’s biggest resource development – have been banned from using chairs and told not to sit down during their shifts. Guidelines for efficient work practices are contained within a memo issued by one of the lead Gorgon contractors. Other rules include staff being monitored on the amount of time they take to move around the sites and stricter break enforcement, which will see only one employee being allowed on break at a time so work can always continue on the site.
Despite the recent slowing in demand for iron ore, Chinese leaders have said they will continue to support resources investment in Western Australia. China’s National Development and Reform Commission, a powerful economic planning agency, is considering more policy support for Chinese companies investing in overseas projects. Deputy head of the overseas investment division Wang Jianjun said Chinese companies should not be deterred: “Investment activity must not slow down as a result of recent short-term economic challenges,” Mr Jianjun said.
The West Australian
A full review of resource development in the Kimberley has been called for by the mining industry after Premier Colin Barnett seemed to dismiss the option of developing a massive bauxite resource in the area. Association of Mining and Exploration Companies chief executive Simon Bennison said that approvals and planning for the “mineral rich” region should not be done on an ad-hoc basis. “If the State Government is going to restrict mining within the region then a proper consultation and review process needs to take place within the industry,” Mr Bennison said.
Analysis prepared by Deloitte Access Economics for the Australian Petroleum Production and Exploration Association has found that Australia’s GDP could increase by $455 billion between now and 2035 if producers are able to capitalise on the country’s unprecedented oil and gas boom. However, The West Australian also reports that cost pressures are causing trouble with the stable development of many projects.