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LNG: $200b worth of Australian projects 'probably not breaking even'
Topic Started: 7 Sep 2015, 06:42 PM (3,112 Views)
createdby
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http://www.smh.com.au/business/energy/lng-200b-worth-of-australian-projects-probably-not-breaking-even-20150906-gjggi0.html

LNG: $200b worth of Australian projects 'probably not breaking even'

September 7, 2015 - 8:02AM
By PERRY WILLIAMS

Six liquefied natural gas projects under construction at a cost of $200 billion will struggle to break even because of the oil price slump, the International Energy Agency said, and there is little prospect of three in the planning stage going ahead.

The agency said even if oil prices recovered and averaged $US60 a barrel for the next few years, Australia's LNG industry – one of the world's biggest – will struggle to be profitable.

"In a $US60 oil environment the Australian projects will continue, but you are probably not breaking even," the IEA's senior gas expert, Costanza Jacazio, said in an interview from Paris. "Will anything else in Australia proceed beyond this next portion of projects? I think in this environment it is very unlikely."

The warning by the agency, the OECD's adviser on energy, highlights the danger to foreign companies of investing in Australia's high-cost economy.

Singapore-based energy forecaster Fereidun Fesharaki said the economics of the planned LNG projects in Australia are a "tragedy" due in part to over-optimistic expectations that Asian buyers would continue to pay historically high prices.

"I am looking at oil to average a maximum of $US75 a barrel over the next decade, and even then they just won't get a rate of return to justify the investment," said Dr Fesharaki, a former energy adviser to the prime minister of Iran who has close links with Asian LNG buyers.

While most Australian LNG supplied into Asia is locked into long-term contracts, the deals are directly indexed against crude oil prices, meaning a change in oil prices hits LNG prices three to six months later.

Brent crude oil prices, a benchmark for Asian LNG prices, have fallen to US$50 a barrel from $US105 a barrel a year ago.

While the prices underpinning LNG contracts are not disclosed by the gas producers, the current LNG spot price for north-east Asia is $US7.50 ($10.85) per million British thermal units, down from $US20 in last February.

"We will see major projects brought to market over the next twelve months," said Malcolm Roberts, chief executive of the gas industry's trade group, APPEA. "These projects will generate much-needed cash and put Australia in a strong position to take advantage of the forecast recovery in global demand for LNG."

The projects not expected to proceed include Woodside Petroleum's Browse floating project and its Sunrise venture in the Timor Sea and ExxonMobil and BHP Billiton's Scarborough project off Western Australia. The IEA also doubts any existing LNG projects in Australia will receive the green light to expand this decade.

Woodside is trying to reduce the budgeted cost of Browse before deciding on the project in late 2016. But it has hit a stalemate with the East Timor government over developing Sunrise. Exxon and BHP remain hopeful of progressing Scarborough, although it appears to have slipped down their priority list.

The IEA argues that cost blowouts and delays combined with the big drop in the oil price and wilting demand from Asian buyers will severely erode the profitability of LNG plants nearing completion, including those led by Santos and Origin Energy.

Ms Jacazio said while Australia remains on track to overtake the Middle East's Qatar as the world's largest LNG producer later this decade, it will come at a high price.
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Terry
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createdby
7 Sep 2015, 06:42 PM
.

"I think there was a misconception that Asia would have taken whatever quantity of gas at any price," she said.

"That was the false premise against which many of these projects went ahead. You saw buyers go through a tough period of really, really high prices. But now they are relieved and it's the sellers who are facing the heat."
This whole meme has infected our nation's thinking from our leaders to the resource industry to the banks.....and then suburbia. If someone had mentioned the possibility of this 3-4 years ago, you'd be written off as being as mad as a rattlesnake.
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Tick Tock
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Geez this is NOT good news for Oz.......So much profit was expected from our LNG supplies but now its all up in the air.

Oh well at least we can save some reserves for the future if need be????
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Loki
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Quote:
 
While most Australian LNG supplied into Asia is locked into long-term contracts, the deals are directly indexed against crude oil prices, meaning a change in oil prices hits LNG prices three to six months later.

Brent crude oil prices, a benchmark for Asian LNG prices, have fallen to US$50 a barrel from $US105 a barrel a year ago.


Where is Bardon?


“Talk sense to a fool and he calls you foolish.” - Euripides
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lulldapull
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I knew this was going to happen three years ago, because I am in this industry.

But some fuckwit property salesmen here thought they knew better.
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deluded
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lulldapull
7 Sep 2015, 10:30 PM
I knew this was going to happen three years ago, because I am in this industry.

But some fuckwit property salesmen here thought they knew better.
I clearly remember miw trying to tell us why Aus LNG was going to be fine. Where is he now?
Real Trump News -- Real Climate Science News -- Real Democrat Party News
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newjez
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deluded
7 Sep 2015, 11:05 PM
I clearly remember miw trying to tell us why Aus LNG was going to be fine. Where is he now?
He said alot of things about China too, but I think he's returned to Australia now. He hasn't really commented on why. Forced or voluntary? Still bullish? He was sounding a bit pissed off before he left.
Edited by newjez, 7 Sep 2015, 11:13 PM.
Whenever you have an argument with someone, there comes a moment where you must ask yourself, whatever your political persuasion, 'am I the Nazi?'
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Foxy
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Zero is coming...

I thought we should be right in the middle of "peak" oil now. :D :D :D :D

Peter
http://www.afr.com/content/dam/images/g/n/2/1/u/8/image.imgtype.afrArticleInline.620x0.png/1456285515560.png
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lulldapull
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deluded
7 Sep 2015, 11:05 PM
I clearly remember miw trying to tell us why Aus LNG was going to be fine. Where is he now?
there a lot of garbage here...........some well known.
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Loki
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foxbat
7 Sep 2015, 11:35 PM
I thought we should be right in the middle of "peak" oil now. :D :D :D :D

Peter
We are, but demand peaked in 2008.

Cheap oil actually peaked in 2011, but demand destruction has been so rapid that it didn't matter.

Unless China starts growing their fleet of passenger cars at 12% per year :lol , demand destruction will continue.

Here is Volkswagen's shot across the bow.

http://www.wired.com/2008/07/laugh-at-high-g/

Only a two seater, but it is fairly easy to get 100mpg in a 4 door sedan. 100mpg would mean the US uses 2 billion less barrels of oil per year, roughly a Venezuela of oil in efficiency that is production ready right now.


“Talk sense to a fool and he calls you foolish.” - Euripides
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