THURSDAY, DECEMBER 3, 2015
A new assessment released today of Australia’s existing and new LNG projects says that the commodity price slump is unlikely to affect the rapid growth in the nation’s LNG production.
‘There is no sign that OPEC is likely to change its strategy at tomorrow’s meeting, a strategy that has halved oil prices,’ Chief Executive Officer of EnergyQuest, Dr Graeme Bethune, said today.
Dr Bethune was commenting following the release of the influential EnergyQuest quarterly, its milestone 40th edition.
‘The immediate LNG oversupply is also likely to continue with the surge in cargoes from Australia and the United States,’ he said.
‘However, while LNG prices are much lower than they used to be, the new Australian projects are still likely to generate loads of cash, just like the existing projects, and the producers will want the projects to produce as much as they possibly can.’
Dr Bethune said the breakeven operating cost for new Australian projects is quite low, typically below US$4 per million British thermal units (MMBtu).
It is even lower for established projects: the North West Shelf, Darwin LNG and Pluto.
‘Notwithstanding low oil prices and the LNG oversupply, LNG prices are still well above US$4/MMBtu,’ Dr Bethune said.
The new report quotes the average prices realised by the North West Shelf and Pluto in the September Quarter of US$7.20/MMBtu and US$9.12/MMBtu respectively.
Furthermore, most of the volumes from new Australian projects are pre-sold under long term contracts. The report estimates that only 4.9 million tonnes per annum (Mtpa) remains uncontracted out of the full 62.3 Mtpa capacity of the new Australian projects.
‘We expect the Australian LNG projects will still produce uncontracted volumes for spot sales. Even at low spot prices, these cargoes are still likely to generate valuable cash,’ he said.
The report notes that there is no let-up in the pace of Australian LNG development showing that spending on Australian oil and gas development, mostly LNG, was A$10.9 billion in the September Quarter.
‘While spending was down from its peak at the end of 2013, A$10.9 billion is still a lot of investment dollars,’ Dr Bethune said.
And while the fall in the oil price has temporarily dented Australia’s LNG export revenue, revenue is rebounding as new projects come into production. After reaching a record A$1,722 million in January 2015, Australian LNG exports slumped to A$821 million in May.
However by September, they had jumped to A$1,373 million and will continue to grow as new projects come into production. The Queensland LNG projects have already exported over 5 million tonnes since the QCLNG project commenced production at the beginning of the year. It has now been joined by GLNG and APLNG is just around the corner.
‘LNG is becoming an increasingly important Australian export,’ Dr Bethune said.
‘In 2014-15, LNG export revenue overtook thermal coal for the first time, with LNG exports of A$16,924 million compared with coal of A$16,062 million.’
A decade of considerable energy market change
Commenting on EnergyQuest’s milestone 40th quarterly report – marking a decade of Australian oil and gas statistics and analysis – Dr Bethune said Australian petroleum production had increased in that decade by 18%.
‘Within that growth, there has been a dramatic change in the production mix, with oil production down 39% while domestic gas production has increased by 31% and LNG has more than doubled,’ Dr Bethune said.
‘The golden age of gas may not have materialised globally but it certainly has in Australia.
‘However, some other things have changed less than expected.
‘In 2005, Origin Energy’s average realised gas price was $3.37/GJ – the same as it was last quarter.’