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Lloyds List: Australia on a roll after export record

Rob McKay, Melbourne, Lloyds List
Published: Sep 21, 2007

AUSTRALIA is flavour of the year in gas exports. A series of ever more promising contract announcements were made, culminating in Perth company Woodside’s mammoth A$35bn-A$45bn ($29bn-$38bn) PetroChina deal at the start of September, involving 2m-3m tonnes a year over 15-20 years, starting in 2013-2015, writes Rob McKay.

The Asia-Pacific Economic Cooperation heads of government meeting, held at the same time, put the country centre stage, politically speaking, but the fact that its biggest-ever export deal was for liquefied natural gas caught the nation’s imagination.

That Woodside was able to follow up with confirmation of talks with Taiwan’s CPC Corp, with the Taiwanese saying its gas would also come from the Browse Basin was greeted, in cricket parlance, like a cheeky single after a towering six.

That both came after Shell’s 20-year Petro-China deal, worth an estimated A$7.2bn, to be sourced from the Gorgon development was also a source of great satisfaction.

While north Asia and North America have made headlines as destinations, another emerging power in India has also expressed interest in Australian gas.

Shell is in talks with Gujarat State Petroleum Corp, while Petronet LNG could see Gorgon gas by early next year.

If that was all it would be pretty good, but the energy supermajors and domestic majors have expansion plans.

Much of this is being driven by the Gorgon partners, led by Chevron whose chief executive and chairman, David O’Reilly, wants to double annual production to 20m tonnes a year and ConocoPhillips, which is mulling a second train at its Darwin LNG plant and may consider a third.

Australian Bureau of Agriculture and Resource Economics figures show there were $57.4bn of planned or proposed gas projects in late 2006 compared with $38.7bn 12 months earlier.

Its last Australian Commodities report states: ‘Australian exports of LNG increased by 17% to 12.4m tonnes in 2005-06, largely reflecting shipments to Japan from the Darwin LNG project that began in February 2006. The value of LNG exports was A$4.4bn in 2005-06, a rise of 38% from the previous year.

‘In 2006-07, the value of LNG exports is forecast to increase by 30% to A$5.7bn, with the export volume rising by 24% to 15.3m tonnes.

‘The majority of the increase in export volumes is forecast to come from the Darwin LNG project, as it ramps up production to the maximum capacity of 3.24m tonnes a year.’

There are flies in Australia’s LNG ointment, however. The biggest is cost. For example, setting up Gorgon was last estimated at A$11bn. But that was four years ago and expectations are that this will rise to A$15bn. It is a burden being borne by the nation’s whole resources sector due to inflation in material and wages and by regulatory and environmental constraints.

Another smaller one is political risk. This was raised last October when Western Australian state premier Alan Carpenter announced a 15% domestic gas reservation policy aimed at protecting the state’s future energy supplies.

It was agreed to reluctantly by Woodside for its Pluto field and while not in the realms of Sakhalin, major players took note.

A third small one is the continuing controversy surrounding opposition to Australian firms seeking to build US reception facilities thorns in the sides of BHP Billiton and Woodside.

While Australia is the main game, it is not the only one in the region.

Papua New Guinea has two groups, led by ExxonMobil and BG Group, examining projects aimed at delivering LNG in 2013. Interestingly, joint Papua New Guinea and Australian listed mid-tier player Oil Search has stakes in both.

Papua New Guinea’s The National newspaper reported managing director Peter Botten saying on a US roadshow that ExxonMobil was studying various configurations, including a large-scale plant producing 5m-6m tonnes a year or an option of two LNG trains, each with 3.2m tonnes annual capacity.


The location for the Kina29bn (US$9.5bn) project was likely to be at Port Moresby or Cape Possession.

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