The great US hydrocarbon revival of the past three years and huge natural gas finds elsewhere in areas such as East Africa is having a profound impact on the status quo of the upstream energy environment. Whilst recent BP figures suggest US oil output increased 14% between 2011 & 2012, the glut of natural gas is also expected to have a big knock-on effect. A change in stance on gas exports from Washington is now casting doubts over the long term future of Australia’s position as the undisputed “darling” of the global LNG industry. Contractors have flocked to the country to grab a slice of the $90 billion LNG plant build market forecast for the next five years, but unbridled cost inflation coupled with the threat of cheaper supply from elsewhere appeared to be curtailing this opportunity when Woodside formally shelved its $45 billion Browse LNG development in April 2013. At Douglas-Westwood we now expect Australian LNG Capex (fixed-onshore) to top-out at a $25bn peak in both 2014 and 2015.
It’s not clear yet whether lobbying from arbitrage-hungry E&P companies in the US and Canada will expedite the roll-out of multi-billion dollars of anticipated North American LNG export projects, or if environmental and political concerns will keep this gas out of the global market. Despite the virtual certainties of a huge growth in long-term natural gas supply and demand, many questions remain and undoubtedly the global gas industry is headed for a period of major re-definition. So who will be the winners?
Jason Waldie, Douglas-Westwood Singapore
+65 6635 2005 or [email protected]