US shale could threaten Australian LNG exports
Sunday, 25 March 2012 | 00:00
The emerging shale gas industry in the US has been identified as a possible threat to Australia’s liquefied natural gas (LNG) sector, the Bureau for Resources and Energy Economics (BREE) reported.
In an analysis of the LNG market, BREE economist Alan Copeland noted that despite being distant from the growing Asian markets, LNG exports from the US could be price competitive with other suppliers into Asia, owing to the lower cost of feed gas and relatively low capital costs for construction of LNG facilities.
Capital costs of constructing an LNG plant in the US were also expected to be lower than in Australia. Plants located along the Gulf Coast would be located among oil refineries and other heavy industries, where companies could take advantage of existing infrastructure, availability of skilled labour and support industries.
Copeland reported that Canada was also expected to become an LNG exporter over the medium term, with Canadian gas production affected by the low prices achieved in the US, where a significant proportion was sold.
BREE noted that the main weakness for the Australian LNG industry was the relatively high construction costs, with the recent Gorgon, Pluto and Wheatstone projects averaging A$3-billion per million ton of yearly capacity.
However, Copeland speculated that cost intensity could decrease if additional trains were added, asis planned with all three of these projects.
He noted that while the high costs of projects currently under construction in Australia partly reflected industry-wide project inflation over the past few years, the country was regarded as a high-cost project environment.
These high costs were a reflection of high labour costs and the strict conditions state and federal governments placed on projects to ensure that they were sensitive to environmental and community concerns.
BREE predicted this week that over the next five years, the Australian LNG sector would undergo a fundamental change resulting in production capacity increasing four-fold.
In 2016/17, Australia’s LNG export volumes were projected to increase to 63-million tons, rising from the 20-million tons delivered in 2010/11. The value of LNG exports during that time would also reach some A$26-billion, compared with the A$11-billion recorded in 2010/11.
By the end of this decade, Australia’s LNG export capacity was expected to exceed 80-million tons a year, allowing the country to be the world’s largest LNG exporter.
Source: Mining Weekly
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