LNG capacity is still growing in the country but some may be unutilised to 2030 and import projects are planned
Australia's time as the world's largest LNG exporter is expected to be brief, as Qatar and the US boost export capacity and the domestic market absorbs more gas over the next 10 years.
Australia has spent over $200bn on more than tripling its export capacity through the construction of seven LNG projects. Initial shipments departed from Ichthys LNG's first train in October and second train in November, which means the country's capacity is now 83mn t/yr. The last of the projects, the 3.6mn t/yr Prelude, is to start shipments in the coming months, lifting Australia's nameplate capacity to 86.6mn t/yr. This is well ahead of Qatar's 77mn t/yr, although the country briefly produced around 100mn t/yr in 2011-12 as demand rose following the Fukushima nuclear disaster. And Qatar still has an operational cushion that would allow it to ramp up output to easily exceed that of Australia.
A report released by the Australian Competition and Consumer Commission on 18 December said Queensland's three LNG projects — the 9mn t/yr Australia Pacific, 8.5mn t/yr Queensland Curtis and 7.8mn t/yr Gladstone — will operate at only 80pc of their capacity until 2030, broadly in line with utilisation in January-November 2018. This is owing to a lack of sufficient gas reserves within the portfolio of Gladstone LNG's operator, Australian independent Santos. As a result, Australia's overall output would in reality be around 81.5mn t/yr once Prelude starts up — not much higher than Qatar's. And exports will fall quickly behind Qatar's as its Ras Laffan export facility expands to 110mn t/yr in the coming years.
But facilities outside Queensland could operate above their nameplate capacities, maintaining the country's top position for longer. Australia exported a record 6.51mn t of LNG in October, official trade data show. This equates to 78.1mn t/yr, before the second train at the 8.9mn t/yr Ichthys site came on line and before the imminent start-up of the Prelude floating LNG project.
Australia's net LNG exports may fall even further behind Qatar's if, as expected, the next project to be sanctioned is an import one. Developments are planned in Victoria, New South Wales and South Australia, with some backers hoping to make a final investment decision in 2019, and reach first imports by 2021.
East is east
Australia's plans for import projects may appear odd, but they reflect a structural issue in the east of the country. The Gippsland basin in Victoria has been supplying eastern Australia with gas for the past 50 years. But it now only contains around 6pc of the region's proven and probable gas reserves, while Victoria accounts for more than a third of domestic demand, or around 5.34bn m³/yr. The remaining gas offshore Victoria comes from smaller, more expensive fields where production rates are expected to drop sharply in the coming years.
This makes gas output from Queensland more critical. The state has the largest production in eastern Australia, with its three LNG projects reliant on coal-bed methane (CBM) from onshore fields. But CBM is more costly to produce given the higher number of wells producing at lower rates compared with conventional gas. For customers in Victoria, there is the added cost of transportation as the gas must travel in excess of 1,000km.
Domestic gas prices have also been comparable with LNG netback prices and about triple the price before LNG exports started from the Queensland plants in 2014. And higher domestic gas prices have resulted in a fall in generation from gas-fired power plants to 12-year lows, as the increase in renewable energy output from solar and wind farms has pushed gas-fired power stations out of base-load status.
