Wood Mackenzie: Resource Sector Investments in Australia to Reach AUD 85 Bln

Wood Mackenzie expects resource sector investments in Australia to peak in 2013 at A$85 billion (bn), dominated by spending in gas, followed by iron ore and coal. The high investment levels will be sustained over the next three years, surpassing the previous three year period.

Mr. Chris Graham, Head of Australasia Upstream Research for Wood Mackenzie, says, “On the upstream side, the unprecedented level of investment over the last few years is set to continue, reaching A$48 bn in 2013 and peaking at A$50 bn in 2014. Gas expenditure will be around 50% of the total through these two years.”

After gas, spending is highest in iron ore and coal. In 2013, iron ore investments will comprise just over 25% of the total, reaching a record high of A$22 bn. Coal currently ranks third, with approximately 10%of 2013 spending.

Mr. Gero Farruggio, Head of Global Metals and Mining Supply Research, says, “The Australian iron ore sector has invested heavily over the past five years, lifting Australia’s share of global seaborne trade from 35% in 2007 to 44% in 2012. Capital investment in the Australian iron ore sector will reach a peak in 2013 as infrastructure construction and mine expansions are completed by the majors, and Chinese steel production growth moderates. Australia’s dominance will increase further, taking its share of global seaborne trade to over 50% by 2016, as major Pilbara-based mine and infrastructure investments come to fruition.”

“Coal will remain subdued over the next few years due to the tough price environment but the resumption of deferred projects, and development of new producing areas, will keep capital spending strong through to 2017. This will drive an increase in coal’s proportion of overall capital spend in Australia, taking over iron ore’s position as the commodity with the second highest investment.”  

Looking regionally, Western Australia (WA) and Queensland (QLD) dominate, making up 83% (A$24 bn) of total capital expenditure in 2013. This is driven by large gas and iron ore projects. Investments in iron ore will push resource sector investment in WA to record levels. Committed capital spend for the seven LNG projects that are under construction will ensure that investment remains high for the next three years at least, particularly in WA and QLD. Investment in Northern Territory will also peak over this period, primarily due to construction of the Ichthys project.

Mr. Graham summarises, “The outlook for the next three years confirms the strength of the  Australian resource sector, as we see investments being made based on decisions taken during the boom years. Today’s decision makers are faced with different challenges in a changing environment. A new wave of major gas and iron ore projects are needed to maintain these levels of investment in the longer-term.”

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LNG World News Staff, May 16, 2013