LNG exporters seek new growth in Australia as profit boom wanes Ship’s crew

(Bloomberg) –

LNG exporters are looking to advance multi-billion dollar projects and revive the sector’s growth in Australia. They argue that additional stocks of fossil fuels are needed to support Asia’s energy transition.

BP Plc and Woodside Energy Group Ltd. are among the companies studying key developments that would boost industry investment by around A$300 billion ($200 billion) over the past 15 years, a program that has made the country the world’s leading shipper.

The consideration of new projects comes as Australia’s annual export earnings from LNG are expected to fall after peaking at A$91 billion in the wake of last year’s energy crisis and volumes have plateaued. The country has already been usurped by the US as the industry’s No. 1 exporter and is expected to fall behind Qatar as well.

“We see gas playing a critical role in the energy transition,” Samantha McCulloch, executive director of the Australian Petroleum Production and Exploration Association, said in an interview. The industry group’s annual conference runs through Thursday. Speakers include executives from Exxon Mobil Corp., Chevron Corp. and Shell Plc.

“The oil and gas industry is not a passenger on the road to net zero,” Woodside CEO Meg O’Neill said Tuesday at the conference, calling for continued political support for new projects. “In power generation, natural gas causes about half the life cycle emissions of coal,” she said. “I think that’s a pretty strong argument for using more gas.”

The company has tripled profits to a record high in 2022 and is moving forward with the $12 billion Scarborough project. The Company is also considering plans to develop Browse, one of the country’s largest undeveloped natural gas fields, with partners such as PetroChina Co.

BP agreed to buy Shell’s stake in Browse last month, citing the potential to boost energy security in the region. According to Woodside, completion of the development, along with an expansion of the associated North West Shelf project, will require capital expenditures of approximately A$36 billion by the 2060s.

“Our customers in Japan are saying they need the gas, so it’s going to be an investable project — but we still have a lot of work to do,” Meg O’Neill, Woodside’s chief executive officer, said at a conference in Sydney earlier this month .

The war in Ukraine has turned the natural gas market upside down, forcing European consumers to switch to LNG to replace pipeline fuel exports from Russia and creating new competition for buyers in Asia.

According to data from BloombergNEF, nearly 70 contracts have been signed by LNG buyers with US projects since the beginning of 2021, including consumers in Germany, China and Japan, as well as another 12 contracts with Qatar. US exports are forecast to increase by as much as 75% by 2026, while Qatar aims to increase volumes by two-thirds by 2027.

Australia, whose LNG export capacity is currently only scheduled to be increased slightly, has signed six similar deals, according to the data.

“The market looked pretty full before, but now that’s changed,” said Saul Kavonic, a Sydney-based energy analyst at Credit Suisse Group AG. “For the rest of the decade, there’s a huge gap that you need to fill.”

Projects in Australia face the challenge of competing with the US and Qatar and capitalizing on this prospect. The country’s cargoes are rarely shipped outside Asia due to shipping costs, while the Australian government’s moves to increase taxes on projects and tighten powers to restrict LNG exports have scared some overseas buyers.

Demand in Japan and South Korea, two of Australia’s biggest customers, is expected to fall over the next decade as the countries adopt more renewable and nuclear power. There are also doubts about an expected surge in gas consumption across Southeast Asia as some countries seek faster conversion to solar and wind power.

Future projects will also come under closer climate scrutiny as some opposition lawmakers, including Australia’s Green Party, call for a ban on new fossil fuel infrastructure development.

It is projected that Browse alone will emit at least 70 million tonnes of carbon dioxide equivalent over 30 years of operation, a higher rate than other LNG projects.

–Assisted by Stephen Stapczynski and David Stringer.

© 2023 Bloomberg LP

Related Articles

Back to top button

Subscribe To Our Newsletter

Don't miss new updates on your email