The Rising Influence of Rising Affluence

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Australia Sees Surging LNG Exports

[These are official government forecasts. See #msg-40906860 for a map of Australia’s LNG existing and planned facilities.]

http://www.reuters.com/article/idAFSGE6200GT20100302

›Mar 1, 2010
By Bruce Hextall

SYDNEY, March 2 (Reuters) - Australia on Tuesday forecast a dramatic surge in gas exports over the next six years, powered by strong Asian demand, in a bullish prediction that runs counter to fears that the global market is heading into oversupply.

The country's official commodities forecaster predicted that exports of liquefied natural gas (LNG) would nearly double by 2014/15 [!], with demand from China, India and other energy-hungry economies being fed by up to $200 billion in new Australian LNG projects.

The Australian Bureau of Agricultural and Resource Economics (ABARE), in its quarterly outlook, also gave upbeat long-range forecasts for iron ore, the country's second-largest export earner, with a forecast 68 percent jump in exports by 2014/15.

"The current situation is there seems to be ample supply on LNG markets but longer term demand looks very positive," Jammie Penm, ABARE's chief commodity analyst, told Reuters.

"China has an enormous appetite for LNG tonnes and also LNG seems to be the growing feedstock for energy generation."

Australia has about A$215 billion ($193 billion) worth of LNG projects in the pipeline, including A$65 billion already approved, though there have been concerns that some of these projects may never get built because of a global oversupply.

ABARE predicted LNG exports to race to 28 million tonnes a year by 2014/15 from 15 million tonnes in 2008/09, and iron ore exports to reach 546 million tonnes from 324 million as new investment by mining giants BHP Billiton <BHP.AX> and Rio Tinto <RIO.AX><RIO.L> and an army of prospectors reach peak levels.

AUSTRALIA BETTING ON GAS & IRON ORE

ABARE said expansion at Woodside Petroleum's <WPL.AX> Pluto project and Arrow Energy's <AOE.AX> Fisherman's Landing LNG development [#msg-zzz] would be key drivers in Australia's LNG export boom.

In 2014/15, Australia's LNG exports could see another sharp increase, as first production from Chevron's A$50 billion Gorgon project is due to come onstream with 15 million tonnes a year and coal-seam gas-based projects to add another 12 million a year.

Some energy analysts still see global oversupply around 2014 and 2015 as these new projects hit production, but expect demand to catch up again fairly quickly, thanks to Asian demand.

"There's risk of a supply glut between 2014 and 2015, so those projects that have secured customers are more likely to get off the drawing board," said analyst Nick Raffan of Fat Prophets.

"But beyond the 2015 timeframe, we could see a much tighter market that would bode well for some of these Australian projects."

Australia, which could replace Qatar as the world's largest LNG producer by the end of the next decade, remains very bullish on its booming gas export industry, with even the central bank predicting a commodities bull run of 20 years or more.

As many as six Australian LNG projects are rushing to be approved by 2010, including Woodside's Pluto second-train expansion and Inpex's <1605.T> Ichthys project.

The new projects also include three coal-seam gas developments on the east coast proposed by Santos <STO.AX>, BG Group <BG.L>, Origin Energy <ORG.AX> and ConocoPhillips <COP.N>.

THERMAL COAL & URANIUM SET TO BOOM

ABARE also forecast a 47 percent and 30 percent growth in thermal coal and uranium exports over the next six years, again reflecting strong Asian demand, but it made no major revisions to its near-term forecasts for the year to June 30.

In terms of the immediate horizon, ABARE cautioned that growth in OECD countries remained sluggish and any monetary tightening by China could also limit growth.

For farm production, ABARE predicted that the world's fourth largest wheat exporter would raise output by just over 1 percent in 2010/11 and could lift exports by 4 percent, despite weak grains prices, as drought conditions ease. It estimated that wheat output for the year to June 2011 would rise to 21.94 million tonnes from a downwardly revised 21.66 million tonnes in 2009/10.

"Prices have been falling because of large harvests around the world and large stocks," ABARE's Penm said.‹