LNG dominates Australia's $280.5 bil list of resources projects
Sydney (Platts)--29Nov2012/431 am EST/931 GMT
Australia's current palate of 87 committed major resources projects,
worth a total of A$268.4 billion ($280.5 billion), is dominated by LNG
developments, according to a report released this week by the Bureau of
Resources and Energy Economics.
Oil, gas and LNG projects account for 18 of the total and are worth more
than 70% at A$194.9 billion. BREE excluded Shell's Prelude floating facility
from its list of committed LNG projects, which comprised Gorgon and
Wheatstone in Western Australia, Ichthys in the north, and Gladstone,
Queensland Curtis and Australia Pacific LNG on the east coast.
"To put this in perspective, and to show the scale of the pipeline in
Australia, the total committed expenditure on Australia's oil and gas
projects is comparable to the total cost of the Apollo Moon Program in 2012
prices," BREE Executive Director and Chief Economist Quentin Grafton said in
Article continues below...
|Request a free trial of: Oilgram News|
Oilgram News brings fast-breaking global petroleum and gas news to your desktop every day. Our extensive global network of correspondents report on supply and demand trends, corporate news, government actions, exploration, technology, and much more.
In the six months to October, the major approval in the petroleum sector
was the second production train at Australia Pacific LNG's project on Curtis
Island in Gladstone. APLNG gave the go-ahead for the 4.5 million mt/year
train two in July this year, and the project is expected to cost around A$9
Projects in the feasibility stage, including the big A$36 billion Browse
and A$24 billion Arrow LNG projects, are estimated to be worth around A$104.5
There are also many LNG, gas and oil projects further back in the
pipeline. BREE counted 13 such projects worth a total of between A$26.8
billion and more than A$32 billion at the publicly announced stage. Of these,
floating LNG projects such as the Bonaparte and Cash Maple developments,
along with expansions to Woodside Petroleum's Pluto facility in Western
Australia are among the highest value projects, at a cost of more than A$5
"There have been numerous reports of cost increases for LNG projects at
both the feasibility and committed stages in the past six months," BREE said
in the report.
"Controlling cost pressures and also market conditions will be crucial
determinants to further expansion of the Australian LNG sector. Australia's
LNG industry is not alone in experiencing these pressures, but as a high cost
country Australia is particularly vulnerable to further cost increases in
terms of its impact on future investment," the bureau added.
"There are six LNG facilities already under construction worth A$166
billion with the potential for over A$100 billion to be invested on new
developments and expansions to add additional trains at existing facilities.
This next wave of investment is far from guaranteed and future investments
will be reliant on the ability of project managers to control construction
costs. As a result of cost pressures, prospective LNG projects may require
project proponents to consider lower cost development alternatives if they
are to progress to a FID [final investment decision] and construction."
Since the start of this year, the budget for BG Group's 8.5 million
mt/year Queensland Curtis LNG project in Gladstone has blown out from $15
billion to $20.4 billion, and Santos was forced to bring forward $2.5 billion
in development spending at its 7.8 million mt/year Gladstone LNG project,
taking the joint venture's initial outlay from $16 billion to $18.5 billion.
Chevron is also reviewing costs at Gorgon, with an announcement expected
before the end of this year.
"Factors driving these cost increases, such as skilled labor shortages,
a high Australian dollar and transport to remote locations, as well as
changes in scope, are common to all current and prospective projects," BREE
said. "Thus, it is not unreasonable to expect that LNG projects currently at
the feasibility stage may be subject to additional costs in the future. Five
of the six LNG projects currently under construction, and also the recently
completed Pluto LNG project in Western Australia, have had substantial cost
increases since they were at the equivalent of the publicly announced stage."
Oil and gas exploration has historically represented a significant
portion of total minerals exploration expenditure in Australia, BREE added.
The sector's share of investment peaked at 63%, or A$4.2 billion, in
2008-2009, but has since declined to around 45% in 2011-2012, when it fell 6%
year on year in real terms to A$3.3 billion.
--Christine Forster, email@example.com
--Edited by Elston Soares, firstname.lastname@example.org