Australia’s LNG industry boom stalled after falling oil prices amid coronavirus | Living environment | Instant News

Remarkable growth in Australia’s liquefied natural gas (LNG) industry, the main cause of the recent increase in national greenhouse gas emissions, has stalled indefinitely, with decisions about more than $ 80 billion in investment postponed due to falling oil prices drowned by coronavirus and geopolitical price war.

The price of Brent crude is less than half the price in early January fall again on Friday even though the OPEC oil cartel and its allies reached a supply agreement to stop Saudi Arabia and Russia from flooding the world with more oil than could be used. Asian spot prices for LNG, which are related to oil benchmarks, are down about two thirds in six months.

An unprecedented accident has pushed oil and gas giants to delay investment decisions on projects including massive Woodside Burrup Hub Expansion off the coast of Western Australia and The $ 7 billion Santos Barossa Project 300 km north of Darwin. Decisions about the first part of the expansion of the Burrup Hub, including $ 17 billion the development of the Scarborough gas field, has been pushed to 2021.

Calls to Barossa and the largest part of the proposed Burrup Hub, the development of an untapped Browse gas field involving Woodside, Shell and BP worth $ 30 billion, has been postponed until an unnamed date. In onshore gas exploration, Origin Energy has pause exploration drilling for its unconventional gas projects in the Northern Territory Beetaloo Basin.

Analysts say while prices are expected to recover, the pace and scale of the recovery is almost impossible to estimate and may not reach the level needed to justify new LNG investment for years, if at all. Climate activists say the extended delay is likely to make new large investments more difficult to justify as markets increasingly value clean energy compared to fossil fuels.

Peter Coleman, Woodside’s chief executive, to The Australian Weekend the industry is facing a worse situation that he sees and indicates the company’s projects are not guaranteed to move forward. “I would suggest if we are still sitting here in 12 months in the oil and gas industry in this difficult price setting situation then we will have a fundamentally different industry and fundamentally different views on how to create value,” he said. .

David Low, a senior analyst with Wood Mackenzie consultants, said his assessment remained that the Scarborough and Barossa project would be subject to sanctions next year, but the two projects still had challenges to overcome related to ownership structures, and could have their schedules released.

“If oil prices are slow to recover, operators can choose to postpone further discretionary spending and stay focused on strengthening their balance sheets. This will likely mean further delays for Australian projects, “Low told The Guardian.

Australia produces less oil, but the LNG industry has grown dramatically since 2012 because development has begun at the top end. It passed Qatar to become the world’s biggest exporter last year, by revenue reach $ 51bn, place it second from iron ore among the country’s energy and energy exports.

Skyrocketing LNG production has added to the greenhouse gas pollution that traps heat in the country. Emissions in Australia (not including those who burn gas after being sent overseas) up 16.9% this year through September, all except canceling emissions reductions from power plants and agriculture because national emissions only fell 0.4%.

The Western Australia Conservation Council estimates that the expansion of the Burrup Hub alone could add nearly 20 million tons of the country’s annual emissions, around 3.7% of the national total, if it wants to continue fully. This could produce a further 80 million tons a year when gas is burned abroad.

The fall in oil prices has not completely hit the existing Australian gas project because it takes around three months for changes in the benchmark crude oil to affect LNG contracts, but hundreds of oil and gas workers has been laid off or stood up because the company is cutting investment planned this year.

Oil prices initially plummeted as OPEC leaders Saudi Arabia and Russia flooded the market, partly to damage the US shale industry. Combined with a significant decline in demand due to the economic shutdown of Covid-19, it sent oil prices to their lowest level in 18 years. On Friday, the Saudi-led group known as OPEC + agreed to reduce oil supplies by 10% a little direct effect.

Tom Swann, a senior researcher at the Australian Institute’s think tank, said the complicated problem facing the oil and gas industry is the increased electrification of transportation, which could cause some investors to rush to get reserves from the ground while there is a market to sell them.

“The three trends are together [the pandemic, the geopolitical price war and electrification] “It just means there is chronic uncertainty in the industry, and that is reflected in the company’s share price and investment decisions,” he said.

He said the future of the industry would depend on most governments. “They can double and try to pump more oil and gas, or we can see investments in electric vehicles and charging stations,” Swann said.


Tim Buckley, from the Institute for Energy Economic and Financial Analysis, said whatever the price reduction means the Australian LNG industry is no longer possible to reach $ 50 billion in LNG exports. He said he would increasingly struggle to compete with renewable energy at much lower marginal costs.

Piers Verstegen, from the WA Conservation Council, said the delay should be seen as an opportunity for companies to stop and spin from carbon intensive projects to clean industries, such as green hydrogen, which Woodside has indicated it sees as part of its future.

“This gives everyone breathing room,” he said. “They have been locked in a collision course with the global climate. This is their chance to change direction. “


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