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Some LNG projects in Australia in trouble

Planned Australian liquefied natural gas (LNG) export projects are at risk as sinking energy prices make investments unviable, reports Reuters. A nearly 50% slump in Asian LNG prices this year has pressured any project without a Final Investment Decision (FID). Last week, Woodside Petroleum Ltd. (ticker: WPL) delayed the FID for its $40 billion Browse floating project with Royal Dutch Shell (ticker: RDSA) and BP (ticker: BP).

The Browse Project is a floating LNG (FLNG) project in the Browse Basin, located approximately 425 km (264 miles) offshore north of Broome in Western Australia. The Brecknock, Calliance and Torosa fields – which are collectively known as the Browse resources – are estimated to contain gross contingent resources of 14.9 Tcf of dry gas and 441.2 million barrels of condensate, according to Woodside.

ExxonMobil (ticker: XOM) and BHP Billiton’s (ticker: BHP) $10 billion Scarborough project also appears to be in trouble. Scarborough will be “commercially challenging” to justify given all of the competing LNG projects, said Noel Tomnay, global gas and LNG research head at Wood Mackenzie.

“China’s growing pains as well as slugs of LNG coming into the market: that’s a fairly wicked combination. It would take a very brave soul to ignore the prevailing market.”

GDF Suez (ticker: GSZ) and Santos (ticker: STO) are seeking alternatives for their Bonaparte floating project, Woodside has indefinitely delayed its Sunrise project, while Shell has yet to commit to its Arrow project where it has cut hundreds of positions.

Still set to become a world leader

Despite the rougher outlook, Australia’s plan to become the top LNG exporter remains on track.

Origin Energy (ticker: ORG) still plans to start its $25 billion Australia Pacific LNG project next year and has taken steps to shore up its cash position. Shell’s Prelude floating facility, set to start up in 2017 as the world’s biggest maritime vessel, will likely go ahead as it is already being built.

LNG

Source: Shell

 

LNG

Source: Shell

 

BG Group’s (ticker: BG) $20.4 billion Gladstone LNG project has arrived at port, confirming that the start-up of the LNG project is just days away. The ship, the Methane Rita Andrea, arrived off the coast of Gladstone of Monday and is waiting outside the harbor to comply with regulatory procedures and until the Queensland Curtis LNG venture is ready to start loading from Curtis Island, reports The Sydney Morning Herald.

With projects under construction going ahead as companies treat them as sunk cost, Australia’s LNG export capacity is set to more than triple to 86 million tons a year before 2020, reports Reuters. That output would put it ahead of current leader Qatar which exports 77 million tons per annum and U.S. expectations of selling 61.5 million tons per annum by 2020.

Important disclosures: The information provided herein is believed to be reliable; however, EnerCom, Inc. makes no representation or warranty as to its completeness or accuracy. EnerCom’s conclusions are based upon information gathered from sources deemed to be reliable. This note is not intended as an offer or solicitation for the purchase or sale of any security or financial instrument of any company mentioned in this note. This note was prepared for general circulation and does not provide investment recommendations specific to individual investors. All readers of the note must make their own investment decisions based upon their specific investment objectives and financial situation utilizing their own financial advisors as they deem necessary. Investors should consider a company’s entire financial and operational structure in making any investment decisions. Past performance of any company discussed in this note should not be taken as an indication or guarantee of future results. EnerCom is a multi-disciplined management consulting services firm that regularly intends to seek business, or currently may be undertaking business, with companies covered on Oil & Gas 360®, and thereby seeks to receive compensation from these companies for its services. In addition, EnerCom, or its principals or employees, may have an economic interest in any of these companies. As a result, readers of EnerCom’s Oil & Gas 360® should be aware that the firm may have a conflict of interest that could affect the objectivity of this note. The company or companies covered in this note did not review the note prior to publication. EnerCom, or its principals or employees, may have an economic interest in any of the companies covered in this report or on Oil & Gas 360®. As a result, readers of EnerCom’s reports or Oil & Gas 360® should be aware that the firm may have a conflict of interest that could affect the objectivity of this report.

 


Important disclosures: The information provided herein is believed to be reliable; however, EnerCom, Inc. makes no representation or warranty as to its completeness or accuracy. EnerCom’s conclusions are based upon information gathered from sources deemed to be reliable. This note is not intended as an offer or solicitation for the purchase or sale of any security or financial instrument of any company mentioned in this note. This note was prepared for general circulation and does not provide investment recommendations specific to individual investors. All readers of the note must make their own investment decisions based upon their specific investment objectives and financial situation utilizing their own financial advisors as they deem necessary. Investors should consider a company’s entire financial and operational structure in making any investment decisions. Past performance of any company discussed in this note should not be taken as an indication or guarantee of future results. EnerCom is a multi-disciplined management consulting services firm that regularly intends to seek business, or currently may be undertaking business, with companies covered on Oil & Gas 360®, and thereby seeks to receive compensation from these companies for its services. In addition, EnerCom, or its principals or employees, may have an economic interest in any of these companies. As a result, readers of EnerCom’s Oil & Gas 360® should be aware that the firm may have a conflict of interest that could affect the objectivity of this note. EnerCom, or its principals or employees, may have an economic interest in any of the companies covered in this report or on Oil & Gas 360®. As a result, readers of EnerCom’s reports or Oil & Gas 360® should be aware that the firm may have a conflict of interest that could affect the objectivity of this report.