New research conducted by the Reserve Bank of Australia has found that resources exports have created about 500,000 jobs across every major industry during the past 7 years. The research also shows that more than 1.1 million workers now depend on the wider resources economy. This is due to massive job creation in sectors such as construction and manufacturing. The report explains that 3.25 per cent of the nation’s workers are employed in resources extraction, 6.75 per cent owe their jobs to the sector’s flow-on benefits. “The Reserve Bank estimate is in line with Treasury estimates that resources account for 15 to 20 per cent of total GDP, and the new paper offers insights into how the flow-on effects are felt across the economy.”
Today’s Australian has a 12-page lift out looking at “The Future of Energy”. Despite having the fastest growing liquefied natural gas industry in the world this article concludes that high costs have tempered expectations for future growth. “The cost pressures that plagued the sector in 2012 are unlikely to abate in 2013,” Deutsche Bank analyst John Hirjee said. “No new projects are due for completion this year, while most continue to ramp up activities. “As a result we see continued labour and materials constraints as a key theme, and believe that further capital expenditure guidance increases are all but inevitable.”
Woodside Petroleum have allocated $US 1.1. billion in new spending for the Leviathan gas project in Israel. In doing so the mining company has denied that it does not see as important the need to develop the Browse LNG Project in Western Australia’s Kimberley region. Underlying net profit for the company rose 25 per cent to $US2.06bn, which took into account Woodside’s $US974m sale of a minority stake in the Browse venture. Revenues rose 32 per cent to a record $US6.35bn.
BHP Billiton has appointed a new chief in Andrew Mackenzie, signalling a focus on cost-cutting and ‘uncomplicated assets’. The outgoing Marius Kloppers drew praise from Julia Gillard and Wayne Swan, even though he fought the mining tax and re-negotiated the MRRT. BHP yesterday became the first miner to admit paying any MRRT in the tax’s first six months, revealing it handed over $77m. Rio, the nation’s biggest iron ore miner, paid none.
Steelmaker and iron ore miner Arrium has announced a loss of $447 million and has flagged job cuts. The company blamed what it sees as continued depressed conditions for domestic steelmakers. The past 4 years have seen 2000 job cuts in the steel unit and the departing chief executive Geoff Plummer has said “The nature of these businesses is such that we have to keep making them sharper and more cost-efficient . . . unfortunately that means labour reductions will continue.” Mr Plummer stressed that no major restructuring was over the horizon.
Rising shale oil production in the US and other nations is forecast to drive down global oil prices, potentially delivering the world’s economy a $US2.7 trillion ($2.6 trillion) boost by 2035. The news is not necessarily good for Australia, particularly its growing LNG industry as America’s shale oil gas boom means tougher competition for Australian LNG exporters.
Australian Financial Review
Chinese oil giant PetroChina is expanding its operations into Australia buying stakes in two Western Australian exploration ventures from ConocoPhillips. PetroChina will buy 20 per cent of Poseidon, in which Karoon Gas also has an interest. It will buy 29 per cent of the shale gas venture in the Canning Basin. Bernstein Research analyst Neil Beveridge said the investment “has positive implications for Australian LNG (particularly the Browse Basin) and Australia’s nascent shale industry”.
US energy giant Chevron has also joined PetroChina and other major energy companies in investing in Australia’s shale gas market. Chevron will acquire up to 60 per cent of Beach’s interest in two exploration permits in central Australia at Nappamerri Trough. In addition to Chevron, PetroChina and ConocoPhillips, Norway’s Statoil, the UK’s BG Group and Japan’s Mitsubishi are among the line-up of international energy companies that have secured a foothold in Australia’s nascent but promising shale gas sector.
Due to persistent weak demands for its product, mineral sands miner Iluka resources will have to cut 200 jobs. The company recorded a 33 per cent fall in annual profit to $363.2 million.
Lower iron ore prices are influencing the profitability of a number of projects in Australia. Mount Gibson’s first half profit slumped 71.4 per cent to $37.1 million reflecting the lower prices it received for its iron ore. The result was achieved on revenue of $416.2 million, up 10.4 per cent on the previous corresponding period.
WA Agriculture is also struggling.
For the first time in 80 years large tracts of WA’s pastoral land won’t be farmed. This is the worst it has been since the Great Depression with WAFarmers President Dale Park commenting “It’s an indication that things are pretty tough. I’m not quite sure what we’re looking forward to next year.”
The Russian mining giant Norilsk Nickel will most likely close its only remaining Australian mine, with Australian managing director Edwin van Leeuwen warning staff that its Lake Johnston operation will close in April if a buyer is not found. More than 180 jobs are at risk if Lake Johnston closes.
The Reserve Bank of Australia (RBA) says the mining investment boom is close to its peak. Speaking in Canberra on Friday, RBA governor Glen Stevens said, “Looking ahead, it appears that the peak in the level of resource sector investment is now close.”
Santos is on track to meet production targets despite its profit slumps, particularly in its LNG operations. Net profit for the full year to December 31 fell to $519 million from $753 million in 2011, when Santos benefited from various asset sales. Revenue rose 18 per cent to $3.3 billion. Underlying profit rose 34 per cent to $606 million, driven by higher liquids volumes and gas prices which were partly offset by higher costs linked to new assets.