Oz LNG to face challenge from US

Release Date: 2011-03-31

Australia’s growing dominance as a leading supplier of gas to Asian markets could soon be challenged by growing gas supplies in the US.

Consultancy company Deloitte said the liquefied natural gas market in the US was changing rapidly with the country's growing shale reserves proving to be a "game changer" for the energy market.

“Talk of new LNG re-gasification terminals in North America has been replaced by talk of liquefaction plants, which means that US shale gas may find markets in Asia and compete against other suppliers, including Australia,” Deloitte’s Australian Oil and Gas leader, Stephen Reid, said.

In its 2011Deloitte Oil & Gas Reality Check report the company said gas demand in China was likely to quadruple from the 80 billion cubic metres recorded in 2009 to 320 Bcm by the end of the decade.

However, Reid added that China could begin to exploit its own unconventional gas reserves to meet its growing demand and lower its dependence on imports.

“China itself has substantial unconventional gas reserves which, to date, remain largely unexploited as a result of low permeability, limited infrastructure and poor economics,” he said.

“A new pricing strategy introduced by the Chinese government in June could promote development of China’s reserves, and potentially reduce China’s future dependence on LNG imports.”

The development of China’s unconventional resources and the possible export of US shale gas however will take time which Reid said would provide a window of opportunity for Australia to establish a dominant position in the supply of gas to Asia.

“Australia has the added advantage that it is one of the few places in the world where foreign investors can acquire an equity interest in gas, which provides additional capital to enable development projects to proceed,” he said.

In its report Deloitte said Australia was fast becoming a challenger to Qatar as the world’s leading exporter of LNG and could soon pass Malaysia and Indonesia.

However, it warned skilled labour shortages and access to project finance and raw materials could place a strain on Australia’s efforts to complete LNG and other large scale infrastructure projects ahead of global competitors.

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