APPEA: Australia underweight in share of LNG supply

Rick Wilkinson
OGJ Correspondent

PERTH, Apr. 9 -- Australia has been called "underweight" in its share of the LNG supply market, given the size of the country's gas resources, according to Edinburgh-based consultants Wood Mackenzie Ltd.

Speaking at Australian Petroleum Production & Exploration Association's annual conference in Perth this week, Ben Hollins, WoodMac's head of European gas and power, said the pace of development of new LNG projects in Australia has been too slow because it is hindered by rising costs, disunity among joint venture partners, and obstacles to environmental approvals.

For example, Hollins pointed out that a jump in construction costs has delayed the Chevron Corp.-led Gorgon project.

Currently Australia has just two producing projects having a combined capacity of 15.2 million tonnes/year, and yet APPEA has set a target of up to 60 million tonnes/year of LNG production by 2017.

Hollins said that target looks increasingly unlikely to be met. WoodMac estimates Pacific Basin demand for LNG could jump 83% to 203 million tonnes by 2020, which is up from 111 million tonnes produced this year.

Hollins said there are at least 12 rival projects being proposed in Australia, and LNG buyers in Asia are frustrated at the slow rate of development. The buyers are also confused as to which projects might succeed.

"This creates a headache for them," he said "and that's not good for Australian interests either."

Chevron's Wheatstone Project and Shell's radical floating LNG proposal for Prelude field in the Browse basin are recent examples of the scramble by gas owners to get their projects to the starting line to take advantage of the forecast boom in global demand for LNG.

Hollins believes the Australian government needs to play a part in ensuring that developments do proceed.

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