From the WSJ.
Once a first choice country for energy investment due to its political stability and large
natural-gas reserves.
Appreciation of the currency and higher wages than expected,blowout Capex of Australian Big Gas
Projects.
"Although those problems have been around for a while, they are becoming more worrisome now that gas prices elsewhere have dropped and buyers have more options for securing energy supply.
The industry has more than US$160 billion of liquefied natural gas investments currently in flight [being built]. But upward of another US$100 billion in potential future projects could be at risk," Chevron Australia Managing Director Roy Krzywosinski said.
Chevron and partners Exxon and Royal Dutch Schell Plc, have delayed work to expand their US$52 billion Gorgon project. Gorgon is Australia's largest natural-gas resource, containing an estimated 50 trillion cubic feet of natural gas—enough to meet U.S. demand for two years. Chevron is the project's operator and largest shareholder. The Browse project has also been delayed.
Project delays carry large risks for companies like Chevron as future supply from Australia would compete for customers with U.S. projects offering cheaper gas. LNG in Asia has traditionally been sold via long-term contracts, with prices linked to relatively expensive crude oil, whereas export deals in North America are based on sharply lower domestic gas prices there. Analysts think Australian gas-export prices may need to fall by as much as 25% to compete with U.S. gas prices.
Once a first choice country for energy investment due to its political stability and large
natural-gas reserves.
Appreciation of the currency and higher wages than expected,blowout Capex of Australian Big Gas
Projects.
"Although those problems have been around for a while, they are becoming more worrisome now that gas prices elsewhere have dropped and buyers have more options for securing energy supply.
The industry has more than US$160 billion of liquefied natural gas investments currently in flight [being built]. But upward of another US$100 billion in potential future projects could be at risk," Chevron Australia Managing Director Roy Krzywosinski said.
Chevron and partners Exxon and Royal Dutch Schell Plc, have delayed work to expand their US$52 billion Gorgon project. Gorgon is Australia's largest natural-gas resource, containing an estimated 50 trillion cubic feet of natural gas—enough to meet U.S. demand for two years. Chevron is the project's operator and largest shareholder. The Browse project has also been delayed.
Project delays carry large risks for companies like Chevron as future supply from Australia would compete for customers with U.S. projects offering cheaper gas. LNG in Asia has traditionally been sold via long-term contracts, with prices linked to relatively expensive crude oil, whereas export deals in North America are based on sharply lower domestic gas prices there. Analysts think Australian gas-export prices may need to fall by as much as 25% to compete with U.S. gas prices.
In May, the U.S. approved Freeport LNG Development LP's $10 billion Quintana LNG-export project in Texas, the second U.S. development to move forward after Chenerie Energy Inc.'s Sabine Pass project in Louisiana.
Both involve converting old LNG import terminals into export facilities, making them cheaper to build than Australian projects because infrastructure—such as pipelines and storage tanks—is already in place".
