• Australia will miss next wave of LNG developments, Shell warns
Australia will miss next wave of LNG developments, Shell warns
13 Mar, 2018, No Comment

Summary: Australia is likely to miss out on the next multi-billion-dollar wave of new liquefied natural gas developments, senior Royal Dutch Shell executive Steve Hill has warned, with the nation’s potential growth projects set to struggle to compete against rival proposals in the Middle East, Russia and ­Africa.....

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Speaking to The Australian in Singapore, Mr Hill said Australia had plenty of gas to supply both growing domestic markets and LNG exports, but warned the next crop of potential developments was unlikely to be competitive.

Shell, which has interests in the North West Shelf, Prelude and Gorgon LNG projects in Western Australia as well as the coal-seam gas-fed Queensland Curtis LNG plant, is increasingly bullish on the outlook for LNG after a highly anticipated glut in supply was comfortably absorbed by the international market last year.

China’s concerted efforts to drive down pollution drove a 50 per cent uplift in its consumption of LNG last year, while many other countries — particularly in Asia — are emerging as LNG buyers as they tackle their own pollution and energy security issues.

But while Shell is forecasting the international LNG market to more than double in size by 2035, the oil giant does not believe Australia will attract the sort of large-scale investment it witnessed over the past decade.

Mr Hill nominated the Middle East, Russia and east Africa as the regions most likely to support the development of new and expanded LNG projects, and said Australia was unlikely to figure prominently either as a source of new supply or additional LNG trains.

Instead, Australia’s LNG industry is likely to centre on ­connecting undeveloped fields into existing LNG plants that are running out of gas.

“I consciously didn’t mention Australia,” Mr Hill said.

“As some of the older projects start to see a decline in their existing supply arrangements, there’s clearly an opportunity for new fields to go in and keep those LNG plants running and keep supply in the market. But it’s not obvious that Australia would be competitive compared to some of the other alternatives I mentioned for new investment.”

While the Australian gas industry has come under scrutiny in the past year due to rising domestic gas prices, prompting the Turnbull government to introduce new powers that allow it to cap LNG exports if needed, Mr Hill said he believed Australia had “plenty of gas” to meet its domestic needs and support LNG ­exports.

After spending past few years digesting the massive wave of new LNG investments and navigating through the plunge in oil prices, Australia’s LNG sector has in recent months once again started to talk about growth.

Woodside is working on options that would see the long-undeveloped Browse and Scar­borough gasfields off WA processed through the company’s existing LNG facilities on the WA coast — and potentially support an expansion of its Pluto LNG project — while Santos has started talking about opportunities to feed more gas into its Darwin LNG joint venture.

While Shell is a joint venture partner with Woodside at Browse, its most advanced LNG growth projects are further afield.

The projects at the head of the queue for Shell are the Lake Charles project in Louisiana and the LNG Canada project on the Pacific coast of North America.

The major wildcard facing the next wave of LNG developments is Qatar, which rivals Australia for the title of world’s biggest LNG producer. The Middle Eastern nation last year lifted a 12-year-old self-imposed moratorium over the development of the huge North Field gas reserve and could grow its output substantially, while Russian President Vladimir Putin has also said he wants his country to become the world’s biggest producer of LNG.

Shell’s bullish outlook for LNG is predicated on the expectation that gas demand will continue to rise as the global population grows larger and wealthier at the same time as countries get more serious about tackling air pollution.

Mr Hill expects LNG demand to grow in tandem with renewables, with the gas to help even out fluctuations in wind and solar supply while also meeting demand from industry and transport that can’t be met through renewables.

Shell’s thesis is supported by the surge in LNG demand from China last year, which grew its LNG consumption by about 50 per cent in a year it was forecast to increase only moderately. That growth comfortably absorbed the additional LNG supply that came into the market, helping underpin LNG prices in the process.

“For the people who say there’s an oversupply of LNG and there’s a glut of LNG, the evidence doesn’t really support that,” Mr Hill said.

“LNG supply is growing very, very rapidly, but the market is also growing rapidly. The market demand is easily keeping up with the growth in supply, and therefore the balance in the market is pretty even.”

theaustralian.com.au 12/3/2018

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