Page 5 - OGA-Sept-2015
P. 5
COMMENT
OIL & GAS AUSTRALIA
Australian LNG in a changing world
BY ANDREW HOBBS, lower prices were unlikely to significantly dent throughout 2016, the Deloitte report said.
GROUP EDITOR production until next year. While new Australian exports could pose a
INDUSTRY watchers As lower oil prices took their toll, production challenge to traditional natural gas exporters
say that while the declines in non-organisation of petroleum Qatar and Russia, high project development
world of oil and gas is exporting countries (OPEC) led oil supply costs would hamper the nation’s efforts to
changing, little is likely to fall by 600,000 barrels a day in July, while supply global customers cost-effectively.
to change for Australia OPEC production was steady at three-year
in the near future. highs. “This is especially true in the current low-
price environment,” the report said.
Speaking at the The IEA report said non-OPEC supply
release of Deloitte’s growth was expected to slow sharply from a “Planned LNG export projects are already
Oil and Gas Reality Check 2015, the group’s 2014 record of 2.4 million barrels a day to 1.1 being put on hold and the country’s coal seam
national oil and gas leader Mike Lynn said million barrels a day this year. gas projects are struggling to get costs in line
Asia was central to the future of the Australian with shareholder expectations.”
LNG market as the nation’s focus shifts from “On the other side of the equation, global
construction to marketing and trading. supply continues to grow at a breakneck pace Mr Lynn said about 60 million tonnes of
China would remain a centre for demand, – currently running 2.7 million barrels a day additional LNG supply would come from
the report said, with the nation’s crude oil above a year earlier – despite a collapse in oil Australia in the next 24 months, just as buyers
imports rising above 7 million barrels per day prices,” the report said. were challenging some of the long-held basics
(MMbbl/d) in December 2014 and forecast to of pricing and contracting.
grow to just under 18 MMbbl/d by 2040. “While a rebalancing has clearly begun, the
That said, with the growth rate of China’s process is likely to be prolonged as a supply “Australia’s LNG projects are generally tied
economy now at its slowest level in 24 years, overhang is expected to persist through 2016 to the legacy model that includes long-term
the nation’s willingness to pay top dollar for - suggesting global inventories will pile up contracts and prices indexed to oil,” he said.
imports could start to fade, potentially leading further.”
the country to consider new sources of supply. “But Australia simply isn’t competitive
Supply and demand balances in natural gas Oversupply is also an issue in LNG markets, in its current state and things need to
trade were also likely to shift in coming years, the Deloitte report said, with volumes growing change. Local operators need to respond to
the Deloitte report said, as the start of US at an average of more than 6.5 per cent per year changing customer demands and focus on
shale production spurred price reductions and over the past decade. margin improvement by targeting cost and
have led the nation to consider starting LNG productivity gains if they are to achieve their
exports to Europe and Asia. Furthermore, falling natural gas prices full potential.”
The International Energy Agency’s (IEA) were threatening the economic viability of
August Oil Market Report said demand for new LNG projects around the world, with In other words, for Australia to ensure it is
oil had rebounded to the highest levels in five Credit Suisse and Wood Mackenzie estimating not left behind, it must focus on increasing
years as consumers responded to lower prices, most Australian LNG projects needed to productivity and attempting to reduce costs to
but global supply also remained strong and the earn between $12 and $14 per million British make its projects globally competitive.
thermal units to break even.
This recommendation will be familiar to
For comparison, projects in Mozambique anyone who has been following analysis of the
needed roughly $11.50/MMBtu while Australian oil and gas industry in comparison
Canadian projects needed between $9/MMBtu with global markets. l
and $10/MMBtu. US gas prices are expected
to range between $4 and $4.50/MMBtu
Safety JuSt Got
even Simpler!
Fieldid helps businesses increase workplace safety, www.safesite.com.au
reduce liability and eliminate the problems that come with
pen-and-paper-based safety management systems!
Want to See more? email fieldid@mayohardware.com.au
for a free customised demonstration!
Oil&GasAustraliaJournal_FIELDiD-187x76m_2015_1/3.indd 1 CELEBRATING 34 YEARS OF PUBLISHING IN AUSTRALIA ENERGY PUBLICAT2IO5/N08S/135 3:54 PM
OIL & GAS AUSTRALIA
Australian LNG in a changing world
BY ANDREW HOBBS, lower prices were unlikely to significantly dent throughout 2016, the Deloitte report said.
GROUP EDITOR production until next year. While new Australian exports could pose a
INDUSTRY watchers As lower oil prices took their toll, production challenge to traditional natural gas exporters
say that while the declines in non-organisation of petroleum Qatar and Russia, high project development
world of oil and gas is exporting countries (OPEC) led oil supply costs would hamper the nation’s efforts to
changing, little is likely to fall by 600,000 barrels a day in July, while supply global customers cost-effectively.
to change for Australia OPEC production was steady at three-year
in the near future. highs. “This is especially true in the current low-
price environment,” the report said.
Speaking at the The IEA report said non-OPEC supply
release of Deloitte’s growth was expected to slow sharply from a “Planned LNG export projects are already
Oil and Gas Reality Check 2015, the group’s 2014 record of 2.4 million barrels a day to 1.1 being put on hold and the country’s coal seam
national oil and gas leader Mike Lynn said million barrels a day this year. gas projects are struggling to get costs in line
Asia was central to the future of the Australian with shareholder expectations.”
LNG market as the nation’s focus shifts from “On the other side of the equation, global
construction to marketing and trading. supply continues to grow at a breakneck pace Mr Lynn said about 60 million tonnes of
China would remain a centre for demand, – currently running 2.7 million barrels a day additional LNG supply would come from
the report said, with the nation’s crude oil above a year earlier – despite a collapse in oil Australia in the next 24 months, just as buyers
imports rising above 7 million barrels per day prices,” the report said. were challenging some of the long-held basics
(MMbbl/d) in December 2014 and forecast to of pricing and contracting.
grow to just under 18 MMbbl/d by 2040. “While a rebalancing has clearly begun, the
That said, with the growth rate of China’s process is likely to be prolonged as a supply “Australia’s LNG projects are generally tied
economy now at its slowest level in 24 years, overhang is expected to persist through 2016 to the legacy model that includes long-term
the nation’s willingness to pay top dollar for - suggesting global inventories will pile up contracts and prices indexed to oil,” he said.
imports could start to fade, potentially leading further.”
the country to consider new sources of supply. “But Australia simply isn’t competitive
Supply and demand balances in natural gas Oversupply is also an issue in LNG markets, in its current state and things need to
trade were also likely to shift in coming years, the Deloitte report said, with volumes growing change. Local operators need to respond to
the Deloitte report said, as the start of US at an average of more than 6.5 per cent per year changing customer demands and focus on
shale production spurred price reductions and over the past decade. margin improvement by targeting cost and
have led the nation to consider starting LNG productivity gains if they are to achieve their
exports to Europe and Asia. Furthermore, falling natural gas prices full potential.”
The International Energy Agency’s (IEA) were threatening the economic viability of
August Oil Market Report said demand for new LNG projects around the world, with In other words, for Australia to ensure it is
oil had rebounded to the highest levels in five Credit Suisse and Wood Mackenzie estimating not left behind, it must focus on increasing
years as consumers responded to lower prices, most Australian LNG projects needed to productivity and attempting to reduce costs to
but global supply also remained strong and the earn between $12 and $14 per million British make its projects globally competitive.
thermal units to break even.
This recommendation will be familiar to
For comparison, projects in Mozambique anyone who has been following analysis of the
needed roughly $11.50/MMBtu while Australian oil and gas industry in comparison
Canadian projects needed between $9/MMBtu with global markets. l
and $10/MMBtu. US gas prices are expected
to range between $4 and $4.50/MMBtu
Safety JuSt Got
even Simpler!
Fieldid helps businesses increase workplace safety, www.safesite.com.au
reduce liability and eliminate the problems that come with
pen-and-paper-based safety management systems!
Want to See more? email fieldid@mayohardware.com.au
for a free customised demonstration!
Oil&GasAustraliaJournal_FIELDiD-187x76m_2015_1/3.indd 1 CELEBRATING 34 YEARS OF PUBLISHING IN AUSTRALIA ENERGY PUBLICAT2IO5/N08S/135 3:54 PM
