Australia to Dominate Floating LNG Market through 2016

Australia's proximity to growing liquefied natural gas (LNG) demand in Asia, its sizable conventional and unconventional gas resources, stable fiscal regime and accessibility to international oil and gas companies, are driving LNG development in the Land Down Under.

UK-based energy research and analysis firm Douglas-Westwood reported that Australia will dominate the floating LNG market between 2010 and 2016 with $5.3 billion in projects. Thirty-six million tones per annum (mtpa) of LNG is under construction in Australia, and more than 120 mtpa is being proposed or in the planning stages, a number that keeps growing as companies discover additional gas reserves, according to the International Gas Union (IGU) World LNG Report 2010.

Australia currently produces 20 mtpa of LNG, but this production level could rise to more than 60 mtpa by 2016 and by 2035, a third of all planned production from proposed and sanctioned LNG projects could come from Australia, said Peter Cleary, VP of Corporate Strategy and Development for Santos Ltd.

LNG development in Australia is being driven partly by development of conventional gas reserves and by coal-bed methane gas to LNG projects, IGU noted. LNG projects under construction include Shell's Prelude floating LNG project, Woodside's Pluto project and Chevron's Gorgon LNG project. These projects represent 25 mtpa.

In Australia, the rapid rise of coal seam gas exploration, development and production has resulted in new additions to its supply. The revolution in coal seam methane has resulted in 16 mtpa of LNG supply from coal seam gas being sanctioned in the past year; another project may be sanctioned later this year, said Cleary.

Shell's recently sanctioned Prelude FLNG project will be one of the biggest game changers the industry will see. FLNG will unlock stranded gas fields, making these reserves commercially viable. "At Santos we are confident our Bonaparte LNG venture with GDF Suez will be another pioneering project in this field," Cleary said.

Santos, Australia's largest domestic gas producer, has a unique LNG portfolio consisting of its Darwin conventional gas supply project, a stake in the ExxonMobil-operated LNG project in Papua New Guinea focused on the Hides gas/condensate field, the coal seam gas to LNG project at Gladstone, and the Bonaparte floating LNG project.

Looking forward to the future LNG market, Cleary sees LNG exporters becoming importers, the increasing importance of partnership with national oil companies, increased market liquidity and trade flow complexities, and new technologies enabling the development of coal seam gas, shale gas, floating LNG and regasification and storage.

Historically, Australian coal bed methane, or coal seam gas development, has typically been part of an integrated power generation effort and/or focused on local retail gas distribution. But more recently, the engine of growth for coal seam gas has shifted to Australia, where there are hopes and plans to link the country's well known and readily accessible reserves and resources to the expected strong demand growth for gas in Asian markets, according to a Ernst & Young report, Coal seam gas: broadening the energy mix.

However, expanded coal seam gas supplies in Australia will face intense gas-on-gas competition, not only from other Australia gas/LNG projects but from other Southeast Asia sources as well as from the Middle East and Russia, Ernst & Young noted.

Australia LNG Project Update

Australia currently is the fifth largest LNG exporter worldwide, and the Australian oil and gas industry is seeking to make Australia the world's first or second largest LNG exporter by 2020, the Australian Petroleum Production and Exploration Association (APPEA) said.

At present, Qatar is the largest LNG exporter with approximately 77 mpta, nearly four times that of Australia's LNG export capacity. While a number of projects are planned for Australia, the majority of these projects will have to move forward if Australia were to replace Qatar as the top LNG exporter. Australia-based LNG projects also face challenges from the isolation of prospective sites, which makes sourcing difficult, environmental issues, aboriginal land rights and political issues. Westwood noted that the Greater Sunrise LNG project is being held back because the Timor Leste government wants an onshore plant rather than FLNG.

Shell in May made the final investment decision for its plans to produce gas from the Prelude field via an FLNG facility. Prelude is located in the Browse Basin, northeast of Broome Western Australia, in water depths of approximately 820 feet. According to APPEA, the country currently has two producing LNG developments, including the North West Shelf and Darwin projects, with three projects under construction in northern Western Australia, Pluto, Gorgon and Prelude, and two in Queensland - Queensland Curtis and Gladstone LNG.

Woodside Energy in late June signed a Native Title Agreement that would establish the Browse LNG Precinct near James Price Point north of Broome in Western Australia. The agreement will allow Woodside to proceed with development of its Browse LNG project. Meanwhile, the first LNG cargo delivery from Woodside's Pluto LNG project will take place in March 2012; the scheduling delay has been attributed to slower than expected progress on the commissioning of the onshore gas plant, seven weeks of direct weather delays and an allowance for an increased contingency. The revised estimate is expected to result in an A$900 million increase in cost to a total of A$14.9 billion (100% project). This estimate includes arrangements with customers affected by the delay.

Japan-based Inpex has received environmental approval from the Australian government for its Ichthys LNG project, paving the way for a final investment decision in this year's fourth quarter. The proposed project includes a subsea production system, semisubmersible central processing facility, a floating production, storage and offtake vessel located in the Ichthys field in the Browse Basin, approximately 124 miles offshore the northwest coast of Western Australia. Onshore gas processing facilities will be located at Blaydin Point, near Darwin. A 549-mile subsea gas pipeline will link the offshore and onshore facilities. Ichthys is expected to product 8.4 million tones of LNG and 1.6 million tones of LPG (liquefied petroleum gas) per year.


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Md.Maqbul-E-Elahi | Jul. 21, 2011
Why not. Let us look forward.


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