Forecast: Australia to Rise as World’s Largest LNG Exporter by 2018

The first Australian shipment of liquefied natural gas (LNG) from Woodside Petroleum's Pluto project in Western Australia this April is not just a milestone for the country's gas industry. It could also help pave the way for the country to become the world's biggest LNG exporter by 2018.

Analysts forecast that Australia could seize from Qatar the title as world's largest LNG exporter because of an expected rapid growth in the LNG industry. The development of LNG exports would also add a third commodity to Australia's resources boom outside the traditional coal and iron ore.

Besides Woodside's North West Shelf LNG project, there is another LNG venture in Darwin which would have a combined capacity of 20 million tonnes of LNG a year. By 2018, the figure is expected to go up to 80 million tonnes, the Bureau of Resources and Energy Economics (BREE) estimated with eight more large LNG projects coming on stream. The new projects include Pluto and BG's $20-billion Queensland Curtis project.

BREE said that with 70 per cent of global LNG capacity currently under construction in Australia, the gas reserves are capable of supporting 4 to 5 decades of production. It would establish Australia's reputation as a reliable supplier of LNG.

Citigroup analyst Mark Greenwood pointed out that the addition of 60 million tonnes of LNG in just seven years beats the growth previous logged by current top producer Qatar.

Reports said $200 billion has been committed to the eight approved LNG projects and another $150 billion investment in plant expansion and new projects are waiting for final investment decisions. If all these money would come it, it would boost Australia's LNG production by 60 million tonnes.

However, analysts also pointed out that Australia is probably the most expensive country to build a large LNG projects and the costs are still rising which could cause delays in some Greenfield ventures such as Woodside's $38-billion Browse project or Shell's $20-billion Arrow joint venture with Petrochina.

The bases of the analysts are BREE estimates that the Gorgon and Wheatsone projects of Gorgon would incur a capital cost of $3 billion per million tonnes of yearly LNG capacity. In contrast, the PNG project in Papua New Guinea would cost $2.3 billion while another LNG venture in Angola has a cost of $1.7 billion.

Although majority of LNG buyers such as Japan, South Korea and Taiwan want to see the rise of similar LNG production in African states such as Mozambique and Tanzania, the Asian buyers would still likely rely heavily on Australia for the bulk of their supply. It is due to the country's low political risk and reputation as a reliable commodities exporter.

"From a buyer's perspective, security of supply is critical and foremost in their minds when they are contracting volumes.... While Australia may have challenges, it's still OECD production, it's still low political risk and even if projects are a bit late, it is still safe and secure production for the next 20 to 30 years," Wood Mackenzie head of Australasia upstream research Craig McMahon was quoted by Financial Times.

However, there are doubts over the Browse LNG project due to growing community opposition, increasing costs and cheaper North American gas export alternatives due to a U.S. shale-gas oversupply that depressed domestic U.S. gas prices.

Due to the extension on a deadline for an investment decision Woodside made in December 2011 to the federal and West Australian governments, first LNG exports from the planned James Price Point plant would likely be moved to 2018 from previous expectation of 2017.