Action needed over Australia’s slipping LNG position: ConocoPhillips warns
Australia is lagging in the race to supply growing demand for LNG, and domestic shortfalls will be exacerbated if no action is taken, the head of ConocoPhillips has warned.
Australia is falling behind Qatar and the US in the race to become the dominant supplier of LNG and the country’s dwindling ranking should stoke alarm bells in Canberra if it is to address the looming domestic gas supply crunch, one of the world’s largest energy companies has warned.
ConocoPhillips Australia president Jan-Arne Johansen is the latest global executive to sound the alarm about Australia’s attitude towards gas.
Australia is one of the world’s largest LNG exporters but Mr Johansen said it was rapidly falling behind the US and Qatar, which were both rapidly expanding – and without urgent action the country would lose out despite its key advantages, most notably its proximity to Asia.
“It should be a concern that this investment activity is not occurring to the same extent in Australia,” he said. “Australia cannot rely on past investments in gas to supply customer demand through the next decades.
“Despite its abundance of natural resources, proximity to key markets and role to meet energy security of regional trading partners, investment will be needed to bring on new supply to meet its own domestic and international demand.”
The Australian Energy Market Operator earlier this year warned that the east coast faced gas shortages as soon as 2025, and even though mitigation measures could be enacted a large structural deficit will emerge in 2028 as the region’s traditional supply source – the Bass Strait – runs dry.
Australia’s gas industry has warned that the federal Labor government must urgently unlock new supplies, but a number of developments remain awaiting regulatory clearance. The gas industry points to the seeming reluctance of the government to support the industry – a claim rejected by Labor which says it cannot cut corners on due diligence.
Mr Johansen cautioned that for Australia to be attract global capital and investment it must ensure its policy settings are appropriate.
“Australia has enough undeveloped resources to meet its own needs and support those of growing Asian nations. But it will need internationally competitive fiscal, regulatory and approvals regimes to enable investment and timely project execution,” said Mr Johansen.
Giving the green light to LNG export developments could be problematic with the public urging projects that would bolster domestic supplies.
Australia’s new LNG projects have more recently been developed in Western Australia and the Northern Territory, both of which do not have the infrastructure to allow for gas to be piped to the east coast. The gas from these projects would need to be shipped to the east coast via LNG import terminals.
Critics insist importing LNG will be more expensive than traditional sources of gas.
Still, a number of developers, led by Fortescue’s Andrew Forrest, are pushing ahead with plans to develop LNG terminals in the expectation that states will not be able to develop new sources of domestic gas quickly enough.
Mr Johansen said LNG developments underpinned domestic supplies and bolstered the broader economy.
“LNG exports benefit Australia as well, by enabling continued and reliable domestic supply and underpinning domestic energy security. This is particularly true in a small market like Australia that on its own might not have access to the significant capital needed for resource development.” said Mr Johansen. “Australia’s LNG exports drive economic benefits including $93bn of export earnings last year that underpinned an estimated $16bn in direct payments to Australian federal and state governments in taxes and royalties..”
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