Your account already exists. Please login first to continue managing your settings.
Australia already has established itself as a major player in LNG exports. But a recent report suggests the country could surpass Qatar by 2020 if projects progress as planned.
With LNG export plants operating and seven more facilities in the works, Australia has positioned itself to become a key player in the global LNG export scene.
The country’s effort could even push it past leading exporter Qatar by 2020 and outshine future newcomers such as East Africa, Canada, and the US, which has captured much attention as bountiful shale gas plays pave paths toward transforming North America’s energy landscape.
Called an “already well-established Asia-Pacific LNG supplier,” Australia also is predicted to surpass Indonesia and Malaysia, ranked 2 and 3 in LNG exports, respectively , for total liquefaction capacity, according to a recent Economist Intelligence Unit report called “Tankers on the horizon: Australia’s coming LNG boom.”
“Qatar’s capacity is about 77 million tons per year, and Australia has a capacity of about 24 million tons per year,” Peter Kiernan, lead energy analyst at the Economist Intelligence Unit, told Hart Energy’s E&P. He noted Australia currently ranks fourth largest in that area. However, “with seven LNG projects under construction in Australia, we estimate that once all of those are completed it would add 61.3 million tons to Australia’s capacity, (bringing) it to about 85 million tons a year.”
Home to both conventional and unconventional resources, Australia has about 135 Tcf in proved resources, making it the 11th largest holder of gas reserves in the world, according to the report summary.
Data from the US Energy Information Administration (EIA) shows Qatar, which holds the world’s third largest natural gas reserves behind Russia and Iran, is the largest supplier of LNG although it has been producing LNG only since 1997. The country had 896 Tcf of proven natural gas reserves as of Jan. 1, 2011. And natural gas production continues to grow, rising to 3,154 Bcf in 2009, three times the amount produced in 2000, according to the EIA, which also noted most of the increase went toward LNG exports.
“From about the second half of this decade, you’ll see US LNG coming into the market as well,” Kiernan said. “How much is hard to say, but it would start from virtually zero in terms of export capacity and with only one project currently approved.”
Australia, on the other hand, has been exporting LNG for more than 20 years and has increased such exports by 60% in the past decade. With three LNG export plants (with a total capacity of 24.3 million tons per year) and more under construction, “certainly Australia will be the next wave,” Kiernan said. Three of the projects will be supplied by unconventional gas. The other four are sourced from offshore conventional gas fields. “They are basically huge infrastructure undertakings.”
Projects under development include the:
• Gorgon project, operated by Chevron, involving construction of a three-train, 15 million tons per year LNG facility;
• Wheatstone project, operated by Chevron, involving construction of a two-train LNG facility with a combined capacity of 8.9 million tons per annum (mtpa);
• Ichthys project, operated by Inpex, involving construction of a facility with an 8.4 mtpa of LNG and 1.6 mtpa of LPG per annum capacity; and the
• Prelude project, operated by Shell, a floating LNG production facility in Browse basin offshore Australia with a capacity of 5.3 mtpa of liquids, 3.6 mtpa of LNG, 1.3 mtpa of condensate, and 0.4 mtpa of LPG.
“All of these projects currently being built are underpinned by longer-term supply agreements made by a lot of Japanese utility companies,” Kiernan said.
Other destinations for the country’s LNG include South Korea, India, Taiwan and the Middle East. In 2011, Japan topped the list of recipients for Australia’s LNG, receiving 73.4%, followed by China at 19.3%.
“Australia’s proximity to Asia provides its LNG export sector with a large and expanding market nearby,” the report summary said. “The EIU forecasts robust gas consumption growth in Asia, increasing the regional need for imported LNG. Operators of Australian LNG projects, both existing and planned, have underpinned their projects with longer-term supply agreements, which will guarantee supplies to Asian gas-consuming economies for several years.”
However, North America and East Africa could emerge as competitors for the Asian market. The US could become an even bigger threat, considering its likely competitive prices.
More challenges exist.
“There are a whole range of factors which have caused some projects to be more expensive than some of the operators had originally intended,” Kiernan said. “There were seven final investment decisions made in Australia between 2009 and January of this year, so you have a bottleneck of projects that are currently under construction.”
That has unleashed a myriad of issues concerning: supply, cost of raw materials, cost of infrastructure for building plants in remote areas, connecting offshore fields to terminals that are several hundred kilometers away, a stronger Australian dollar, and a high demand for skilled labor, Kiernan said.
“There is a lot of cost factors that have come into play in the last years which have caused some of the projects to end up likely being more expensive than what the operators had originally intended,” he said.
However, the obstacles can be overcome in Kiernan’s opinion. He cited an example in which an LNG project was about a year behind schedule, but eventually came online in 1Q 2012.
“These projects might be more expensive. They might end up being behind schedule,” he said. “But once the final investment decision is made, it’s a pretty big decision to cancel that project because you’ve got arrangements with the bank. You’ve got supply agreements in place.”
It may take longer than 2017 for Australia to reach Qatar’s export level, assuming the county has no capacity increases, due to these challenges. However, reaching that level is an attainable goal.
“Certainly, we think that it’ll still happen even if it’s delayed by two or three years or so,” Kiernan said.
Contact the author, Velda Addison, at email@example.com.