Oil and Gas News

International oil agency skeptical about Australian LNG

New major LNG projects in Australia will struggle to make profit due to the oil price slump, according to the global oil monitor International Energy Agency (IEA).

With another three LNG projects currently in the planning phase, the IEA has said it is unlikely they will progress to construction, Brisbane Times reported.

Senior gas expert Costanza Jacazio said that even in a $US60 oil environment, Australian projects could continue, albeit without breaking even.

"Will anything else in Australia proceed beyond this next portion of projects? I think in this environment it is very unlikely,” he said.

The prediction by the IEA has been read as a warning to foreign companies considering investment in the higher-cost Australian economy.

Singapore-based energy forecaster Dr Fereidun Fesharaki described the economics of the planned LNG projects in Australia as a "tragedy", with planning and costing based on expectations that Asian gas customers would continue to pay historically high prices for the commodity.

"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," he said.

The three projects thrown into doubt are Woodside Petroleum's Browse FLNG project, the Sunrise venture in the Timor Sea, and ExxonMobil and BHP Billiton's Scarborough project off Western Australia.

APPEA chief executive Malcolm Roberts said there would be major projects brought to market over the next year.

"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,” he said.

Over the past six months new LNG projects in Queensland have exported $1.14 billion in worth of gas between January and June inclusive in 2015, according to state treasurer Curtis Pitt.

"LNG is one of Queensland's great economic success stories, one that will continue to shape the state economy in coming decades," he said.

"LNG exports are projected to hit $15 billion by 2016-17, earning the state valuable export dollars and annual royalties while supporting thousands of jobs."

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