10 November 2014
The Australian Financial Review
With many countries in Asia moving to a cleaner energy future, Australia’s much talked about liquefied natural gas boom is set to take off with several major LNG projects about to come online.
“Australia has been developing more LNG capacity at the one time than any other place on earth has ever done,” Graeme Bethune, chief executive of energy advisory firm EnergyQuest, said.
He said Australian LNG exports will grow from about “25 million tonnes a year now to about 80 million tonnes by about the end of the decade”.
Australia has three existing LNG projects and seven schemes in development around the country. Of the seven still under construction, four are located along the north coast of Western Australia, with three more in Queensland.
Over $180 billion is being invested across the seven projects.
Operated by Santos, the Gladstone LNG project in Queensland is expected to go online in 2015, with 7.2 million tonnes a year in aggregate contracted to Kogas in South Korea and Petronas in Malaysia.
The company also has a stake in the Darwin LNG plant, which began production in 2006 and has delivered more than 400 cargoes of LNG overseas.
Asia Pacific a Key Market
In a speech delivered at the eighth Asian LNG summit in May, vice-president of LNG markets and eastern Australia commercial at Santos, Peter Cleary, identified the Asia-Pacific region as a key market for growth. He said rising demand for LNG exports, particularly in China, presented an opportunity for the local LNG industry.
“Asian gas demand is driving global LNG demand growth and this strong shows no sign of abating,” he said.
“Within the Asian market, LNG is expected to gain market share, meeting 52 per cent of total Asian gas demand by 2030, compared with [the current] share of 35 per cent.”
He said Australia was well positioned to meet the growth in demand, citing our geographic proximity to the growing Asian markets, abundant resources and track record of reliable delivery as competitive advantages.
“Australia is opening doors for new opportunities. We are providing an alternative solution in security of supply for Asia,” Mr Cleary said.
China is expected to become the second-largest importer of LNG by 2017, surpassing South Korea, which currently ranks second behind Japan.
With an economy growing at a tireless rate, China is turning to gas imports to meet domestic energy demands. According to analysis by consultancy group Wood Mackenzie, Chinese gas imports are set to rise at a compound rate of 15 per cent a year through to 2030.
Among the factors contributing to China’s growing LNG demand is its record-high levels of air pollution.
According to Mr Bethune, China is “increasing the share of gas in the total energy mix fairly quickly to reduce air pollution and Australia will [continue to] be supplying quite a lot of that LNG.”
“The fastest-growing market is the Chinese market, but we’ve got solid positions in Japan and Korea as well,” he said, adding: “Australia’s now the biggest supplier of LNG to Japan.”
But Australia also faces competition from LNG projects in North America and East Africa in what has become a race to capitalise on new gasfield discoveries and booming market demand.
While iron ore and coal have traditionally accounted for a large part of Australia’s resource export revenues, the unprecedented growth of the local LNG industry is likely to disrupt this trend in the future.
LNG export earnings are forecast to reach $62 billion by 2017-18, bringing it close to the total earnings from iron ore exports in 2011-12 – $63 billion – according to a 2014 report by the Oxford Institute for Energy Studies.
Courtesy of The Australian Financial Review
10 November 2014