2013-01-08 14:02:53 - New Energy research report from Business Monitor International is now available from Fast Market Research
BMI View: Australia is on track to become the world's largest liquefied natural gas (LNG) exporter by the end of our forecast period in 2021, surpassing Qatar as a series of major projects come online. However, the spiralling costs of LNG project will most likely slow the momentum in further development of Australia's LNG export capacity. The country will also have to contend with a growing reliance on oil imports as domestic crude oil production declines while refining outlook appears increasingly bleak in face of regional competition.
The main trends and developments we highlight for Australia's oil & gas sector are:
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?? Coal bed methane (CBM) will increasingly contribute to the country's gas output, particularly in
the east of the country, where CBM output will feed a number of LNG export terminals that are now under development. Our forecast for gas production is 104.7bcm by 2016. Much of this gas will be exported as LNG, largely to Asian customers. By 2021, gas production is forecast to hit 178.3bcm, with LNG exports surpassing 100bcm. Further expansion of LNG projects could be stalled by a weaker demand outlook as global competition intensifies and/or from the spiralling cost of project developments, owing to a shortage of skilled labour and a strong Australian dollar. ?? As of July 2012, the Petroleum Resource Rent Tax (PRRT) has been extended to cover onshore petroleum projects and the North West Shelf project. Existing royalties and production excise will continue to apply from these areas, but will be creditable against future PRRT liabilities from each individual project. However, the Joint Petroleum Development Area in the Timor Sea remains exempt. ?? Australia's carbon trading scheme - the world's second largest after the European Union - came into effect on July 1 2012. Under this scheme, businesses will pay AUD23 (US$24.18) per tonne of carbon produced. The price will rise by around 2.5% in real terms in 2014 and 2015, but will be determined by the market, subject to a price ceiling and floor, in 2015. This could push the country towards the greater use of gas for commercial and residential needs. ?? According to the country's energy ministry, Australia is using oil three times faster than it is finding it. In 2011, oil production fell by 13.2%from 596,300 barrels per day (b/d) in 2010 to 517,300b/d in 2011. In contrast, oil consumption rose 6.8% y-o-y to hit 1.02mn b/d. Oil and gas liquids production is due to decline further to 505,900b/d in 2016, and eventually to 495,300b/d by2021. ?? Government forecasts suggest petroleum import dependency rose to 50% in 2010, and this is expected to increase further to 78% by the end of our forecast period in 2021. In 2013, we expect Australia's net import requirement to be about 524,400b/d. By 2016, this is expected to rise to 559,800b/d. Gas exports are forecast to rise to 73.4bcm by 2016, bringing in LNG revenues of around US$36.3bn at oil-indexed prices. Net petroleum export proceeds by 2021 are forecast at US$44.0bn, with the higher LNG exports helping to offset the rising oil imports. ?? The refining environment remains weak in Australia. Shell's 79,000b/d Clyde refinery in Sydney will close in September 2012, while Caltex announced that it will shut down the Kurnell refinery - Australia's second largest with a capacity of 124,500b/d and also located in Sydney - in the second half of 2014. Shell's Geelong refinery could suffer the same fate. The age, small size and relatively low complexity of the country's refineries has rendered them uncompetitive against regional counterparts.
At the time of writing we assume an OPEC basket oil price for 2013 of US99.10/barrel (bbl), falling to US$96.20/bbl in 2014. Global GDP in 2013 is forecast at 3.0%, up from an assumed 2.6% in 2012, reflecting some recovery in the US, though uncertainty with regard to the eurozone debt situation and an apparent Chinese slowdown will continue to hamper growth. For 2014, growth is estimated at 3.2%.
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