Friday, January 13, 2012

LNG projects face tougher times

LNG projects face tougher times
Angela Macdonald-Smith
With yet another huge liquefied natural gas project now formally under construction, the signs are pointing to harder times ahead for sanctioning more new LNG projects in Australia.

Inpex’s $US34 billion ($32.89 billion) Ichthys project is the seventh to be approved in the Australian region in just two years, the most rapid rate of approvals ever. But with rising construction costs and mounting competition for lucrative Asian LNG sales contracts threatening to emerge from gas-rich North America, Russia and even eastern Africa, it is crunch time in particular for Woodside Petroleum’s Browse LNG project, which has already slipped down the development queue.

Should the technically and economically challenging venture slip further back, it risks coming into direct competition with inevitably cheaper sources of LNG emerging from other export ventures.

Australia still has a huge volume of gas not committed to one of the eight LNG projects now being built in the country and all the forecasts point to continuing robust demand for the fuel from Asia. The problem is more one of costs, which means the next wave of project approvals is likely to be one of more economical brown-field expansions rather than brand new plants on new sites.
Browse is one of the few green-field LNG ventures still in the wings in Australia. The Arrow Energy project owned by Royal Dutch Shell and PetroChina is another, but because it has an in-built customer in the shape of PetroChina, the pressure is off at least in terms of finding sales markets. (The same cannot be said about environmental approvals because of the storm clouds gathering around coal seam gas development in the eastern states.)

Otherwise, however, Australia is now looking towards a new, different period of LNG development. One that will still have a lot of growth, but will be reliant more on brown-field expansions and smaller, niche floating LNG projects rather than groundbreaking green-field projects.

No comments:

Post a Comment