Australian LNG projects under threat from East Africa discoveries
By: Esmarie Swanepoel
2nd August 2012
PERTH (miningweekly.com) – East Africa’s emerging liquefied natural gas (LNG) industry could pose a threat to Australian projects, consultancy Ernst & Young (E&Y) said this week.
In a quarterly report, global oil and gas leader Dale Nijoka said LNG from East Africa could, in the long term, become more competitive than unsanctioned Australian projects, causing them to be delayed, reworked or possibly cancelled.
“In Australia, the pace of LNG development has resulted in mounting cost pressures for operators. There have been cost over-runs on a number of Australian LNG projects due to inflationary pressures in the local market and appreciation of the Australian dollar relative to the US dollar.”
Nijoka noted that a string of recent gas discoveries in Mozambique and Tanzania had led to a new LNG frontier emerging in East Africa and, although only initial estimates of reserves have been announced, it was believed that there was sufficient gas in place to support several large-scale LNG projects.
“East Africa is geographically well placed to meet the LNG demand in Asian markets,” added Nijoka.
He noted that the gas discoveries have sparked investment interest from both international and national oil companies. While some of the projects in the emerging regions were unlikely to proceed to immediate final investment decisions, Nijoka noted that there would be increased global competition for access to gas-hungry markets.
Meanwhile, Nijoka noted that the shale-gas dash in the US had resulted in a supply glut, which could turn the country into a net gas exporter. He said that despite the weak gas price outlook in the region, national oil companies’ appetite for access to unconventional gas projects in the region remained undiminished.
“The main driver of Asian national oil companies’ pursuit of these unconventional assets is to gain knowledge of the underlying technology in order to apply that expertise to other areas of the globe, as well as to ensure the security of supply.”
European companies were shifting their investment focus to Argentina again, after early shale gas exploration in the region resulted in disappointment.
Nijoka said that Argentina was estimated to have some 774-trillion cubic feet of risked recoverable shale gas resources, of which the Neuquén basin held more than half.
“However, the threat of resource nationalisation, such as in Argentina, continues to be a risk factor for oil companies,” he added.
In May, Argentina nationalised its biggest oil company YPF, seizing a majority stake from Spain’s Repsol as part of a move by President Cristina Fernandez to tighten State control of the economy.
New deals involving infrastructure just aren't happening. Cost blow-outs in Australia and PNG, the reason.
Global oversupply situation and lower prices for Asia. USA has 15 LNG-EXPORT licenses pending before D.O.E.
Sentiment: Strong Sell