Australia the next Qatar?
Ben Hollins, Head of European Gas and Power Consulting at Wood Mackenzie, addressed APPEA delegates with a presentation on Australian gas in a global context in which he said that while Australia could be another Qatar, it is”underweight”? as a producer of LNG compared to where it ought to be.
Despite some uncertainty, Mr Hollins raised then answered the important question. Yes, he concluded, the gas age continues. Summarising the situation he said that pricing uncertainties have delayed new investment decisions in the power sector and that this has slowed gas demand growth, particularly in Europe and North America. However he pointed out that given an explicit cost of carbon, gas has a competitive advantage over coal and that provided the supply is available, global gas demand will continue to increase.
Meanwhile, the globalisation of the gas trade and declining indigenous production in the principal gas markets of North America, Europe, Japan/Korea/Taiwan and the China/India market, inevitably leads to a significant increase in import requirements. Significant growth in the demand for LNG is also apparent, with the demand forecast to treble by 2025.
The next major challenge is supply. Few countries appear able to respond significantly to the LNG growth opportunity given the particular issues faced by some nations and the broader problem of developing new LNG projects.
However Mr Hollins emphasised that Australia should be a big, long-term winner in the LNG supply business. Citing his reasons for this, Mr Hollins highlighted Australia’s substantial gas resource base with significant ongoing exploration; its place as a stable, low risk, investment grade country; the lack of a national oil and gas company; government support of gas exports; its established record of LNG exports since 1989; and the relatively limited impact of domestic demand on export potential and its access to key Pacific Basin gas markets.
Australia, he said, has a real opportunity to be the next Qatar but it must address its own challenges, including upward pressure on project costs, permitting and approvals, shareholder alignment, reserves uncertainty and domestic market obligations.