Off the wire
• 3 killed after car plunges into river in Indian-controlled Kashmir  • Urgent: Civilian killed in firing on protesters in Indian-controlled Kashmir  • Earthquake-ravaged Nepal forms reconstruction authority  • One-third of Australian locations in recession: report  • FATF urges to overhaul anti-terror finance rules to cut off funding channel for IS  • 2nd LD: DPRK cancels participation of S.Korea-hosted Summer Universiade  • Feature: Endless pain of Imperial Japan's forced labor victims in South Korea  • Indian stocks open higher  • Copa America: The story so far  • Ex-Brazil midfielder Doriva quits as Vasco coach  
You are here: 　 Home

Australian LNG projects delayed due to lack of demand: expert

Xinhua, June 22, 2015 Adjust font size:

Australian Liquefied Natural Gas ( LNG) producers hoping to develop new projects will have to wait years before they can find customers while global markets work through a glut of supply.

Woodside Petroleum's Browse floating project, the Sunrise venture in the Timor Sea, and the ExxonMobil-led Scarborough project off Western Australia will all take longer than anticipated, Fereidun Fesharaki, energy forecaster and chairman of FACTS Global Energy, was quoted by Fairfax on Monday.

"The Australian projects, there is room for them, but they will have to wait," Fesharaki said, pointing to a need for more contracted supplies only in 2025 or later.

Fesharaki, a former energy advisor to the Prime Minister of Iran, said Woodside's Browse floating project wouldn't be able to proceed to a final investment decision without contracts with customers, which looked unlikely in the current market.

"There's no buyer: I don't see who is going to buy at any price, " Fesharaki said.

Woodside and its partners are nearing a decision to start detailed engineering and design work on their Browse floating project, and are targeting a final go-ahead for the venture by the end of 2016 with the aim of commencing production after 2020.

Fesharaki said that Papua New Guinea's (PNG) proposed LNG projects would be an exception to the rule, with much more favorable economics allowing the projects to compete against United States based export ventures in the 2021-25 period, although production will likely start later than targeted.

According to FACTS, the U.S. will export 70 million to 75 million tons a year of LNG, about 60 million tons of which have been sold under contract. However, about one-third of that gas was sold to traders who would be eagerly seeking to on-sell it, providing stiff competition in the market and adding to the ongoing glut in supply.

However in the more immediate term, Fesharaki said LNG producers are facing bigger challenges because of an unusually large gap between prices for contract sales, which are linked to crude oil prices, and spot prices, which have plummeted because of low demand.

Spot prices for LNG to be delivered in July to the northeast Asian region average 7.60 U.S. dollars per million British thermal units, down from 12.95 U.S. dollars 12 months ago and almost 20 U. S. dollars in early 2014.

"All needs have been satisfied," Fesharaki said, noting that if oil prices were 80 U.S. dollars or 90 U.S. dollars per barrel, spot LNG would still be only 6 U.S. dollars or 7 U.S. dollars."

"The separation of spot from the contract market is the most unusual I have seen in my life," Fesharaki said, pointing to difficulties for producers relying on the spot market for some sales.

The average contract prices for Australian LNG shipped to Japan are closer to 12 U.S. dollars per million British thermal units.

Fesharaki said new long-term demand in Asia would emerge mostly from buyers needing to replace expiring contracts set to lapse in the 2019-2024 period, however remained bearish on the Chinese and Indian markets. Endi