North Australia Weekly Digest – 18/03/2013

The Australian
Japan’s Ministry of Economy, Trade and Industry announced this week that it plans to use ground-breaking technology to potentially unlock vast new gas sources after successfully extracting gas from a methane hydrates deposit. The breakthrough could help Japan reduce its reliance on imports of LNG, and hence threaten the viability of projects in Australia’s $175 billion LNG development pipeline given Japan currently buys 70 per cent of Australia’s entire LNG exports – which are foreshadowed to hit $30 billion by 2016-17. “The resulting fall in gas imports would severely disrupt the global LNG market, and viability of projects in Australia, Malaysia and Papua New Guinea,” said a report from forecaster Wood Mackenzie.
The Australian Uranium Association has warned that delays in assessment and approval processes are impeding important capital raisings needed for project development and even company survival. Despite the government’s energy white paper’s claim that there is “good potential” in uranium expansion, bureaucrats continue to delay giving the green light to uranium exploration because they fear the political fallout, which contributes to a “severe” competitive disadvantage for Australian producers.
The Australian Financial Review
Citigroup worldwide head of energy Seth Kleinman has said huge supplies of LNG will hit the global market from 2017-2018, which could lead to weaker prices in Asia and pose further problems for high-cost Australian projects. Mr Kleinman said the boom in shale gas would see “a wall” of LNG exports from the US Gulf Coast and shipments from East Africa towards the end of the decade. “This wall is a lot firmer and real than the typical wall of LNG coming, so it does make people nervous… Australia is at an uncomfortable part of the cost curve here: it’s not the cheapest volumes,” Mr Kleinman said.
Manufacturers, energy generators and the oil and gas sector have jointly called on state and federal governments to avoid “knee-jerk policies” that aim to appease community concerns about coal seam gas and wind farms. The heads of Australian Industry Group, the Energy Supply Association of Australia, the Clean Energy Council and the Australian Petroleum Production & Exploration Association have made an appeal to the Prime Minister expressing concern about restrictions on new energy sources. “Knee-jerk policies continue to undermine the development of energy projects within this country… These policies have been implemented with minimal consultation and with little consideration of the impacts and costs they will have on the broader Australian economy and community,” the groups said.
Environment Minister Tony Burke plans to expand the federal government’s powers to override state approvals for projects where water resources are at risk. State governments and industry have condemned the move, saying it reneged the government’s promise to reduce green tape. Business Council of Australia chief executive Jennifer Westacott said the announcement “would duplicate state and territory processes and in the process add new layers of unnecessary uncertainty, complexity and cost. It flies in the face of what makes sense for jobs and the economy, while offering no tangible benefit for the environment.”
The West Australian
Rio Tinto Director Mike Fitzpatrick says that cheap shale gas in the United States will eventually drive Asian and Australian gas prices lower because the US gas revolution will force American coal producers to ship more of their product through West Coast ports to international buyers, pressuring coal and ultimately gas prices. “What will happen is US gas will displace coal and that will in the end affect gas prices in Asia and Australia,” Mr Fitzpatrick said.
The West Australian Department of Agriculture and Food will continue an intensive testing program on the Kimberley’s cattle industry in an effort to address the continuing threat of Bovine Johne’s Disease, which could potentially lead to mass culls of suspect herds and shut down major export markets. The Pastoralists and Graziers association said key issues for its members were the ramifications if Western Australia were to lose its BJD-free status and the commercial impact of any cull.
In his resources briefing column, Reg Howard-Smith says the recent announcement by the Federal Government to “crack down” on the use of skilled migration programs shows a lack of understanding of Western Australia’s economy and the pressures the resources sector faces. With more than $175 billion of resource projects in the construction pipeline, access to a skilled workforce remains a major challenge for the sector, particularly when levels of unemployment are already low.
Influential Labor Minister Gary Gray has argued that floating LNG processing would put Australia at the cutting edge of technology for generations. Although some fear that offshore processing could cost local jobs, Gray sees the technology as an opportunity for WA to broaden its expertise and economy, “That is a great future to have for our kids, it is a great future to have for our resources,” Mr Gray said.
The WA uranium industry has welcomed the re-election of Premier Colin Barnett, saying it provided a ”sense of reassurance in an already testing market”, with a number of projects now able to push towards development. Australian Uranium Association chief executive Michael Angwin said uranium companies could now get on with the business of developing their projects.
The Courier Mail
The Courier Mail also reports on Federal Environment Minister Tony Burke plans to amend legislation that could see future onshore gas and coal mining proposals need to gain Commonwealth approval if they might affect water supplies. Australian Petroleum Production and Exploration Association said the move exemplified the “duplicative and inefficient management” of resources, while former ALP treasurer Keith De Lacy said it was “just another layer of red tape”.