Photo by: Bloombeg
PERTH (miningweekly.com) – A new report by energy economics group EnergyQuest has revealed that it is unlikely that the commodity price slump ill affect Australia’s liquefied natural gas (LNG) growth.
EnergyQuest CEO Dr Graeme Bethune said on Thursday that the immediate LNG oversupply was likely to continue with the surge in cargoes from Australia and the US.
“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.”
Bethune said the breakeven operating cost for new Australian projects was quite low, typically below $4 per million British thermal units (MMBtu). It was even lower for established projects, including the North West Shelf, Darwin LNG and Pluto.
“Notwithstanding low oil prices and the LNG oversupply, LNG prices are still well above $4/MMBtu,” Bethune said.
In its fortieth quarterly report, EnergyQuest noted that the average prices realised by the North West Shelf and Pluto projects in the September quarter reached $7.20/MMBtu and $9.12/MMBtu respectively.
Furthermore, most of the volumes from new Australian projects were presold under long-term contracts. The report estimated that only 4.9-million tonnes a year remained uncontracted out of the 62.3-million tonnes a year 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,” Bethune said.
The report noted that there was 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,” Bethune said.
And while the fall in the oil price had temporarily dented Australia’s LNG export revenue, revenue was rebounding as new projects came into production, the report said.
After reaching a record A$1.7-billion in January 2015, Australian LNG exports slumped to A$821-million in May. However, by September, revenue had jumped to A$1.3-billion and Bethune said that this would continue to grow as new projects came into production.
The Queensland LNG projects had already exported over five-million tonnes since the Queensland Curtis LNG project started production at the beginning of the year, and it had now been joined by the Gladstone LNG project, while the Australia Pacific LNG was just around the corner.
“LNG is becoming an increasingly important Australian export,” Bethune said.
“In 2014/15, LNG export revenue overtook thermal coal for the first time, with LNG exports of A$16.9-billion compared with coal of A$16-billion.”