Gas Goes Global
US LNG Hopes Benefit from Australian Stumble

Australia is America’s biggest competitor in the fast growing global LNG market, but the Pacific nation is struggling to realize its (admittedly massive) natural gas exporting potential. Cost overruns, delays, and technological hurdles have all slowed Australia down in its attempts to become the world’s premier LNG exporter. Reuters reports:

[T]he pace of [Australia’s LNG] growth is much slower than expected because of snafus and higher-than-expected costs that have delayed plans to start or increase LNG exports from four megaprojects, Gorgon, Ichthys, Prelude and Wheatstone, all along or off the coast of northwest Australia.

Now at least three of them, Shell’s Prelude floating LNG production vessel, Inpex’s Ichtys project, and the expansion of Chevron’s Gorgon operation, won’t begin exporting until 2018 or even later, rather than 2017 as previously planned, according to several sources with knowledge of the matter. […]

It should all be a boon for other suppliers of LNG to Asian buyers, such as utilities in the region. These suppliers can also benefit from higher prices. Traders said that the beneficiaries include U.S.-based Cheniere Energy with its facility at Sabine Pass in the Gulf of Mexico, and global energy giant Exxon Mobil with its production in Papua New Guinea.

These Aussie issues don’t completely undermine its LNG clout—the country expects to produce upwards of 80 billion tons of LNG annually by 2020, while the most optimistic projections for U.S. LNG exports only reach 50 billion tons by then. But the overruns, both time- and cost-related, are going to delay that ascension, and in doing so they’re going to open the door for hungry American companies eager to export liquified shale gas.

Because, make no mistake, the U.S. and Australia will be going head to head to compete for the favor of Asian buyers—Japan chief among them—who are hungry for LNG, and who, alongside Europe, look to be the key drivers for LNG demand in the coming decades.

Here in the United States, producers continue to lower costs and raise efficiencies as they drill natural gas from shale rock formations. The biggest costs associated with out LNG supplies come from the actual liquefaction and gassing of these hydrocarbons, whereas Australia is having to contend with some massive, complicated, and expensive offshore projects. They’ll eventually get those operations up and running—the profit motive is too strong not to—but in the meantime, American frackers will be pleased to see another outlet for their product is opening up.

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