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LNG Project Approvals in Australia Set to Slow, BofA Says

Thursday, 26 January 2012 | 00:00
Rising costs and competition from countries such as the U.S. and Canada are set to slow development of liquefied natural gas projects in Australia, said Bank of America Corp.
“With new competition looming and squeezed economics, we conclude 2012 may see a new level of pragmatism amongst developers,” David Heard and James Bullen, Sydney-based analysts at the bank’s Merrill Lynch division, said in a Jan. 23 report. “Costs will place pressure on developers to consider alternatives.”
Australia has eight LNG ventures under development, driven by increasing Asian demand for the less-polluting alternative to coal. Chevron Corp., Royal Dutch Shell Plc, Woodside Petroleum Ltd., Santos Ltd., ConocoPhillips, BG Group Plc and Inpex Corp. are building projects in the country to supply countries including China.
Of six LNG ventures approved globally since early 2011, five are Australian, according to the Merrill Lynch report.
“We do not expect this trend to continue,” the analysts said. “With a new wave of supply competition from the likes of Canada, U.S.A., Mozambique, Alaska and Russia, riskier and less robust Australasian LNG projects have a lower likelihood of securing the needed LNG sales agreements to move forward.”
While global LNG demand is set to keep growing, it will be difficult to approve new projects in Australia after Conoco and its partner, Origin Energy Ltd., move forward with the second stage of their $20 billion project in Queensland state, a decision that’s expected “shortly,” the report found.
LNG growth starting this year will be less “Aussie- centric,” according to the analysts. “The prospects for any final investment decisions for Australian-based developments in 2012 are looking barren.”
Inpex, Japan’s largest energy explorer, and partner Total SA of France approved the $34 billion Ichthys LNG venture earlier this month. The venture, with a planned capacity of 8.4 million metric tons a year, is the most expensive in Australia on a cost-per-ton basis, Neil Beveridge, a Hong Kong-based analyst at Sanford C. Bernstein & Co., said Jan. 13.
Perth-based Woodside said last month it may delay a decision to develop its Browse LNG project by at least six months to 2013. Arrow Energy Ltd., the Australian company owned by Shell and PetroChina Co., expects an investment decision in late 2013 on its planned LNG development in Queensland, Chief Executive Officer Andrew Faulkner said last June.
Source: Bloomberg
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