Some LNG projects in Australia in trouble
Planned Australian liquefied natural gas (LNG) export projects are at risk as sinking energy prices make investments unviable, reports Reuters. A nearly 50% slump in Asian LNG prices this year has pressured any project without a Final Investment Decision (FID). Last week, Woodside Petroleum Ltd. (ticker: WPL) delayed the FID for its $40 billion Browse floating project with Royal Dutch Shell (ticker: RDSA) and BP (ticker: BP).
The Browse Project is a floating LNG (FLNG) project in the Browse Basin, located approximately 425 km (264 miles) offshore north of Broome in Western Australia. The Brecknock, Calliance and Torosa fields – which are collectively known as the Browse resources – are estimated to contain gross contingent resources of 14.9 Tcf of dry gas and 441.2 million barrels of condensate, according to Woodside.
ExxonMobil (ticker: XOM) and BHP Billiton’s (ticker: BHP) $10 billion Scarborough project also appears to be in trouble. Scarborough will be “commercially challenging” to justify given all of the competing LNG projects, said Noel Tomnay, global gas and LNG research head at Wood Mackenzie.
“China’s growing pains as well as slugs of LNG coming into the market: that’s a fairly wicked combination. It would take a very brave soul to ignore the prevailing market.”
GDF Suez (ticker: GSZ) and Santos (ticker: STO) are seeking alternatives for their Bonaparte floating project, Woodside has indefinitely delayed its Sunrise project, while Shell has yet to commit to its Arrow project where it has cut hundreds of positions.
Still set to become a world leader
Despite the rougher outlook, Australia’s plan to become the top LNG exporter remains on track.
Origin Energy (ticker: ORG) still plans to start its $25 billion Australia Pacific LNG project next year and has taken steps to shore up its cash position. Shell’s Prelude floating facility, set to start up in 2017 as the world’s biggest maritime vessel, will likely go ahead as it is already being built.
BG Group’s (ticker: BG) $20.4 billion Gladstone LNG project has arrived at port, confirming that the start-up of the LNG project is just days away. The ship, the Methane Rita Andrea, arrived off the coast of Gladstone of Monday and is waiting outside the harbor to comply with regulatory procedures and until the Queensland Curtis LNG venture is ready to start loading from Curtis Island, reports The Sydney Morning Herald.
With projects under construction going ahead as companies treat them as sunk cost, Australia’s LNG export capacity is set to more than triple to 86 million tons a year before 2020, reports Reuters. That output would put it ahead of current leader Qatar which exports 77 million tons per annum and U.S. expectations of selling 61.5 million tons per annum by 2020.
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