Frenetic Asian demand excites investment in Australian LNG

Location map showing the approximate location of some of the Greater Gorgon gas fields in relation to Barrow Island and the Western Australian coastline. (Creative Commons/Glen Dillon)

One of the biggest LNG projects is subduingly carrying out its job of building the biggest ever energy project in an aim to curb Qatar’s leash on the natural gas export market.

The environmentally sensitive Barrow Island is presently housing the Gorgon liquefied natural gas (LNG) project, partly owned by Chevron but with minority stakes by chief energy companies like ExxonMobil and Royal Dutch Shell. Valued at A$43bn ($45.5bn), once completed, the project will become Australia’s fourth LNG export development and largest single-resource project.

Although Gordon is catching the eye of many, there are few more dozen LNG projects in the pipeline at Wheatstone, Browse & Prelude that demand attention. These projects either in the planning stage or under construction are attracting attention from the frenetic Asian investors who are looking to satiate the industry demand in China, Japan and South Korea.

As John Gass, president of Chevron’s gas unit puts it, Australia’s neighborhood presents fantastic opportunities to Chevron’s improving gas portfolio in the Australian region. Asia’s increasing demand for energy is very important for Australia, since this region is expanding leaps and bounds compared to others.

The IEA has forecasted China’s natural gas demand to rise by 5.9% between 2008 and 2035 while other nations part of OECD, will witness an annual growth of only 0.5%. This means, by 2035, China will be consuming 8.7% of global gas production compared to 2.7% in 2008.

Despite Canberra involved in a hi-profile mining battle, Australia is still considered a safe bet for investment by China and neighboring countries like Japan who are looking for other options after last year’s Fukushima disaster. As nuclear power plants continue to receive a blow, the latest in Germany, the natural gas industry continues to receive strong interest as an alternative source of energy.

However, according to Wood Mackenzie, Perth based analyst it is doubtful about how many projects will actually make it to the line. There is a chance that competing projects will merge if they are unable to keep up with the competition and deadlines. Nevertheless, Gorgon is at an advantage as it expected to deliver it first gas in 2014. In fact, Gorgon’s Chevron and ExxonMobile share have already been already sold to Japanese and South Korean customers. Moreover, Chevron plans to increase its stake in the oil and gas portfolio from 30% to 40% by the end of this decade, indicating the escalating importance of natural gas in big energy companies.

Presently, Australia boasts of two LNG projects – North West Shelf and ConocoPhilip’s Darwin development and a third Woodside project planning to deliver gas later this year. Also, four coal-bed methane have been sanctioned or should be sanctioned soon in Queensland.

If things go as planned then Australia will be able to increase its output from 15m tonnes a year to 70m tonnes a year, thus guaranteeing a place among the world’s top producers.

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