Oz investment to shrink: report

Construction at Chevron's Gorgon LNG project in Australia

Construction at Chevron's Gorgon LNG project in Australia

Investment in the Australian oil and gas industry is fading, and quickly, according to energy economics group EnergyQuest.

EnergyQuest chief executive Graeme Bethune said the boom in investment that protected Australia from the effects of the Global Financial Crisis was fading fast and there are few signs of new projects.

He said the industry’s August report card emphasized the importance of both increasing labour productivity and new oil and gas discoveries.

“Australia has plenty of gas but the highest quality fields are already under development,” Bethune said.

“The best fields always get developed first. Australia needs to reduce the cost of developing remaining lower-quality fields while going all out to make new discoveries.”

He added there was little hope of moderating labour costs, which adds an extra challenge to developing lower quality fields.

“However, the news on exploration is more encouraging.”

Chevron, ConocoPhillips, Santos and Apache have all made high-quality discoveries off the coast of Western Australia.

“While investment in new projects is falling, spending on exploration is holding up at historic highs of around US$4 billion a year and achieving good success.

“Discoveries in the Browse basin in particular have the potential to underpin further LNG investment.”

Bethune said Australia could expect to see LNG exports top out at US$19 billion in 2014-2015 – compared to the $16.5 billion for the latest 30 June balance date.

This report comes as cargoes from four new Australia liquefied natural gas projects are scheduled to take off.

On the production side, Australia is going to see an increase, but without further investment this is unlikely to have long-term positive impacts for the country.

BG's Queensland Curtis LNG (QCLNG) is expected to start deliveries next quarter.

Chevron's Gorgon is expected to start in the middle of 2015 for Train 1, followed by Train 2 six months later and Train 3 another six months after that.

Bethune said the value of the LNG market is expected to grow next year, assuming six months of QCLNG production, with a number of other projects to come online.

“When all projects are in production, total LNG exports could reach over US$50 billion, assuming current prices,” Dr Bethune said.

He added that there is potential for LNG projects globally but many are not reaching final investment decision.

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