RBA: weak prices will not hamper Australian LNG growth

Australian exports of liquefied natural gas are likely to continue to grow over the next few years despite weak prices of the chilled fuel, according to Alexandra Heath, head of economic analysis at the Reserve Bank of Australia (RBA).

The viability of future LNG projects, at least in the short-term, has been challenged by the fact that prices of the chilled fuel in the Asian market have fallen in line with the price of oil, and potential Australian projects are generally considered to be “higher cost than competing projects in other countries“, Heath said at an energy conference on Tuesday.

“The decline in prices is unlikely to lead to a significant reduction in production from existing producers because the high fixed costs of building the infrastructure have been paid and marginal production costs are relatively low.”

According to Heat, approximately A$230 billion ($172.6 billion) – equivalent to around 14 percent of one year’s worth of GDP – has been invested in Australia’s capacity to produce LNG.

As a result, Australia has “increased in importance as a supplier of energy commodities, and growth in exports of thermal coal and, increasingly, LNG have made significant contributions to GDP growth“.

No.1 LNG producer

Australian production of LNG is ramping up following the substantial increase in investment.

Some of this increase in capacity was possible because “developments in technology allowed new reserves to be accessed cost-effectively“.

“For example, of the eight large-scale liquefaction projects that received approval and began construction over the past decade, three are unconventional coal seam gas projects in Queensland and one is among the world’s first floating LNG vessels, to be located offshore in the Western Australian Browse Basin”, Heat said.

These developments mean that Australia is expected to become the “largest producer of LNG in the world with a total capacity of around 85 million tonnes per annum,” she added.

LNG World News Staff