Fukushima fallout drives Japan’s $66 billion demand for WA gas

EXPERTS predict the value of Australia’s LNG exports to Japan will rise by as much as 360 per cent to $66 billion within a few years.

Woodside senior executive, Jill Hoffmann, has been nominated for a Telstra Business Women's Award. Photo: Matthew Poon

WA’s resources boom story is about to change dramatically.

For years the headlines have solely been about China and our iron ore, but soon the rhetoric will be focusing on Japan and liquefied natural gas.

The value of LNG exports from Australia is predicted to increase as much as 360 per cent to $66 billion within a few years. WA accounts for nearly 90 per cent of the country’s LNG capacity.

Curtin University economist John Edwards, who was the principal economic adviser to former prime minister Paul Keating, said it was possible that by 2017 Japan could once again be Australia’s single biggest customer for exports.

It had been No. 1 for decades before being surpassed by China in 2009.

“Although it began with the boom in iron ore prices in 2003, the boom in Australian mining over the next decade will have quite a different shape,” Prof Edwards, who recently authored the book Beyond the Boom, said.

“The first decade was about prices, iron and China.

“The second decade will be about volumes, gas and Japan.

“As our LNG exports increase, and they’ll increase hugely, it’s likely Japan will be a more important customer for Australia than it is today.” Prof Edwards said the increased value of LNG exports would be more than the sum of the increased value of metallurgical coal, thermal coal and iron ore put together.

Chamber of Minerals and Energy of WA chief executive Reg Howard-Smith said WA’s LNG exports to Japan rose 15 per cent in 2013 alone.

“In volume terms, 75 per cent of WA’s LNG went to Japan,” he said.

The comments come as a rapidly falling iron ore price threatens to punch a $2 billion hole in the WA Budget. Iron ore prices this week dropped to $US83 a tonne.

It is now $40 a tonne lower than Treasury forecasted it would be.

A worker at the Pluto LNG plant.

Every $US1 a tonne fall in the iron ore price costs the budget about $45 million.

Premier Colin Barnett said the Fukushima nuclear disaster had seen public sentiment in Japan force the government to seek alternative energy sources.

This positioned WA’s LNG resources perfectly.

“Thirty per cent of its power generation was nuclear before the Fukushima earthquake and tsunami,” he said.

“Now they have about two out of 50 generating units operating.

“There is strong public opposition in Japan to go back into nuclear.

“The solution they see is to increase their use of natural gas and obviously Western Australia is going to play a very important part in supplying that.

“They’re very keen to see major gas projects come into production, particularly in this state and that’s happening with (Chevron’s) Gorgon and Wheatstone, and (Inpex’s) ­Ichthys.”

Inpex’s Ichthys project, located in the Browse Basin 220km off WA’s northwest coast, is expected to produce 8.4 million tonnes of LNG ­annually.

The Japanese company is on track and on budget to export its first shipment of LNG in late 2016.

Chevron’s Gorgon project is also based in the Browse Basin and is set to start producing at the end of 2015.

While its majority owned Wheatstone project won’t start until late 2016.

Mr Barnett said on a recent visit to Japan it was clear to him how highly authorities thought of WA.

“I met the Deputy Prime Minister and five other ministers,” Mr Barnett said.

“That would not happen with any other state.”

Chamber of Commerce and Industry chief economist John Nicolaou said Japan accounted for $23.9 billion, or 18 per cent, of WA’s export earnings in the past financial year.

“The CCI expects that based on these strong foundations that Japan will continue to be a pivotal trading partner for WA, particularly in the growing LNG market,” he said.

Japan is the third-biggest economy in the world.

BY THE NUMBERS

• Japan is the third-biggest economy in the world and was worth about $US5 trillion in 2013.

• By 2017 Japan may be Australia’s biggest single customer for exports.

• In the next five years the value of Australia’s iron ore exports is expected to increase by 53 per cent to $87 billion.

• The value of LNG exports will increase by 360 per cent to $66 billion.

• Two-way trade between Japan and Australia was $70.8 billion in 2010, which was 10 per cent of Australia’s total trade.

• Japan is the third-biggest investor in Australia, with investment stocks worth more than $130 billion in 2013.

Woodside senior executive, Jill Hoffmann, has been nominated for a Telstra Business Women's Award. Photo: Matthew Poon

Relentless drive puts Jill at cutting edge

JILL Hoffmann has been a major part of the huge rise in liquefied natural gas exports from WA to Japan.

She is a vice-president at Woodside Energy and leads a 60-strong team that developed a unique shipping strategy to optimise and grow its LNG trading.

“One of the key parts of the strategy was to control the shipping, when the ships load and where they go,” she said.

“The trading part of LNG has grown, as an industry it’s becoming more predominant.

“We’re having a lot more spot cargoes and short-term agreements than what we’ve had in the industry before.”

The strategy gives Woodside greater control of how it manages volumes of LNG, with the strategy minimising costs.

Part of it was governing the safe and reliable shipping of LNG from Woodside’s Pluto project to Japan.

Woodside is one of Australia’s leading exporters of LNG and currently operates the North West Shelf and Pluto projects in WA’s North-West.

Ms Hoffman has been nominated at the Telstra Business Women’s Awards for her work, which has included championing the return to work of women through job sharing and part-time employment.

“I lead with a relentless drive for sustainable value in both people and outcomes and also authenticity – who I am, what I stand for and what I can and cannot do,” she said.

Ms Hoffman, who has more than 20 years experience in the oil and gas industry, encouraged other women to enter the sector.

“At times it can be challenging, but I think it’s about being yourself and wanting to be treated as an equal,” the mother-of-two she said.

“I hope in years to come it won’t be so male-dominated and a bit more equal, it would be nice to have more women in middle and senior management.”

The Telstra Business Women’s Awards 2014 will be at Crown Perth on Friday, October 10.

Originally published as Fukushima fallout drives Japan’s $66 billion demand for WA gas