Australia Set to Boost LNG Spending to Compete with Qatar

LNG tanker

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Australia’s LNG operators are set to approve LNG infill projects and gas drilling to the tune of US$10 billion in 2021. The approvals are in a bid to stay competitive in a very dynamic global marketplace.

Australian liquefied natural gas (LNG) developers hope to shrug off a difficult 2020 by boosting spending on major new projects in 2021. Furthermore, new projects can help Australia compete with Qatar and the United States and be among the world’s top three LNG suppliers. Currently, the country’s nameplate operating capacity of around 88 million tons per annum (mmtpa) is the world’s largest.

In 2020, Australia exported a record to the tune of 78.0 Mt of LNG, which was up from 77.5 Mt in 2019. Despite disruptions at the Gorgon, Prelude, and Wheatstone projects, the exports were despite the global pandemic-related destruction of demand in early 2020. Australia’s exports in 2020 are estimated to have surpassed Qatar’s production capacity to make the country the world’s top LNG supplier. However, the massive increase in Qatar’s capacity through 2025 could eclipse Australia’s, but Australian LNG operators are optimistic about the future of their projects.

Australia’s top LNG developers intend to turn to spending in 2021. They expect to sanction numerous major projects. Wood Mackenzie said in December 2020 that Australia‚Äôs LNG backfill would be the driver of the expected US$11 billion in gas projects that are set for FID in Australasia in 2021. Plus, Santos said in its 2020 results release last month that the company will allocate over six times higher capital to major growth projects in 2021 compared to 2020.

Moreover, Woodside is exploring opportunities for net-zero LNG production and trading just like Santos, which plans the Moomba CCS project to offset emissions. The LNG developers of the country, like other LNG players around the globe, including Qatar Petroleum, plan to add carbon-offsetting projects or low-carbon to their key new LNG developments. The initiative could attract progressively ESG-conscious buyers.

Daniel Toleman, senior analyst at Wood Mackenzie stated that in 2021, [one can] look for steps towards consistent emissions measurement, increased transparency, and carbon regulation advancing in Australia. Australian LNG developers can also expect a growing market for LNG in the coming two decades as energy transition targets boost demand for gas, which is true, especially in Asia, at the expense of coal.

In its annual LNG Outlook 2021 recently, Shell highlighted that global LNG demand is set to nearly double from 360 million tons in 2020 to 700 million tons by 2040, which is attributed to continued solid demand from Asia and a rise in gas use for powering hard-to-electrify sectors. Shell reiterated that the carbon neutrality goals of the major Asian economies are set to drive global LNG demand growth, 75 percent of which will come from Asia in the next two decades.

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