LNG exporters are seeking to push ahead with multibillion-dollar projects and reignite sector growth in Australia, arguing that additional supplies of the fossil fuel are needed to support Asia’s energy transition.
BP Plc and Woodside Energy Group Ltd. are among the companies studying major developments that would add to the industry’s investment of about A$300 billion ($200 billion) over the past 15 years, a program that transformed the nation into the top carrier Of the world.
The deliberations on new projects come as Australia’s annual export earnings from LNG are expected to decline after peaking at A$91 billion in last year’s energy crisis, and with the volumes that have been stabilized. The country has already been usurped as the leading exporter of the industry by the US and is expected to fall behind Qatar as well.
“We see gas playing a critical role in the energy transition,” Samantha McCulloch, chief executive of the Australian Petroleum Exploration and Production Association, said in an interview. The industry group’s annual conference runs through Thursday with speakers including executives from Exxon Mobil Corp., Chevron Corp. and Shell Plc.
“The oil and gas industry is not a passenger on the road to net zero,” Woodside CEO Meg O’Neill told the conference Tuesday, calling for continued policy support for new projects. “When used to generate electricity, natural gas emits about half the life-cycle emissions of coal,” he said. “That’s a pretty strong argument for using more gas in my book.”
The company tripled profits to a record by 2022 and is moving ahead with the $12 billion Scarborough project. It is also considering plans to develop Browse, one of the country’s largest untapped natural gas fields, with partners such as PetroChina Co.
BP agreed last month to buy Shell’s stake in Browse, citing the potential to bolster energy security in the region. To complete the development, along with an expansion of the associated North West Shelf project, will require capital expenditure of about A$36 billion until the 2060s, according to Woodside.
“Our customers in Japan are saying they need the gas, so it will be an investable project, but we have a lot of work to do,” Woodside chief executive Meg O’Neill told a conference in Sydney earlier this year. month.
The war in Ukraine has upended the natural gas market, forcing European consumers to switch to LNG to replace Russia’s pipeline fuel exports and adding new competition for buyers in Asia.
Since the start of 2021, LNG buyers have signed nearly 70 contracts with US projects, including consumers in Germany, China and Japan, and 12 more deals with Qatar, according to data compiled by BloombergNEF. US exports are expected to rise by up to 75% by 2026, while Qatar aims to increase volumes by two-thirds by 2027.
Australia, with only marginal increases in LNG export capacity currently planned, has agreed six similar contracts, the data show.
“Before all of this the market looked pretty crowded, but now that has changed,” said Saul Kavonic, a Sydney-based energy analyst at Credit Suisse Group AG. “There’s a big gap for the rest of the decade and it needs to be filled.”
Projects in Australia face challenges competing with the US and Qatar to benefit from this prospect. Shipping costs mean the country’s cargoes are rarely sent outside Asia, while Australia’s government move to raise taxes on projects and strengthen powers to restrict LNG exports has scared off some buyers foreigners
Demand in Japan and South Korea, two of Australia’s biggest customers, is expected to decline over the next decade as the nations add more renewables and nuclear power. There are also question marks over an expected increase in gas consumption in Southeast Asia as some countries pursue a faster shift to solar and wind generation.
Future projects will also face increased climate scrutiny with some opposition lawmakers, including Australia’s Greens party, calling for a ban on the development of any new fossil fuel infrastructure.
Navegar alone is expected to emit at least 70 million tons of carbon dioxide equivalent over 30 years of operations, a higher rate than other LNG projects.
–With assistance from Stephen Stapczynski and David Stringer.
