In response to a slumping global oil price, a number of Australian producers have delayed final investment decisions on multi-billion dollar gas projects, including Woodside’s Burrup Hub initiative and Santos’ Barossa development.
In its latest report, analyst EnergyQuest said while certainly not desirable, Australian LNG exporters could survive the current oil price; however, the reduction in expenditure could prove to be a serious issue.
“The long-term problem is not being able to afford the gas field development necessary to keep LNG plants full,” said EnergyQuest.
“This is a global issue. The International Energy Agency estimates that global capital expenditure by exploration and production companies in 2020 will drop by about 32 per cent to US$335 billion ($530 billion), the lowest level for 13 years.
“The Australian project deferrals have national economic implications. At the time of the Global Financial Crisis in 2009 Australia was just starting an LNG development boom.
“Between 2009 and 2015 the oil and gas industry spent $273 billion on development projects, mostly LNG. This was instrumental in Australia avoiding the worst of the GFC.
“Now in 2020 the federal government is again having to step in to stimulate the economy, with measures costing around $200 billion.
“Unfortunately, this time there is no accompanying surge in oil and gas investment and there is unlikely to be until oil prices improve.”
EnergyQuest said despite the oil price and the impact of COVID-19, Australian LNG exports remained high, with 6.8 Mt across 101 cargoes shipped in March, up from 6.1 Mt in 90 cargoes in February.
Australia has been restricting entry of tankers within 14 days of calling ports in China to avoid spreading COVID-19, but EnergyQuest said this has had no impact on shipments so far.
For more information visit the EnergyQuest website.
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