Australia is due for a second wave of LNG project development, despite spiraling costs that have hindered further progress in recent years, Santos Vice President of LNG Markets and Eastern Australia Commercial Peter Cleary said.
Speaking at 8th Asia LNG summit in Beijing, Cleary said that with the first wave of LNG projects now due on stream in Australia, cost pressures in the country were due to ease.
"Committed LNG projects currently under construction are valued at $188 billion," Cleary said. "The simultaneous development of multiple LNG plants has contributed to the rise [in] costs, making Australian projects increasingly expensive."
However, with these projects now nearing completion, Cleary expects cost pressures to abate from 2015 onwards, noting that the wider resources boom in Australia was also reaching the end of a capital intensive cycle.
"For Santos, the capital expenditure peaked in 2013 as we progressed the Papua New Guinea project. We expect our capital expenditure to reduce next year," Cleary said.
Santos remains on track to to bring its 7.8 million mt/year, two train Gladstone LNG project in Queensland online later this year, he added.
The pressure is growing on Australia though to become more competitive with planned projects in the US, Canada, East Africa and Russia.
The country currently has three operational LNG liquefaction plants, seven facilities under construction and a further 12 in the planning stages, although cost blow outs in recent years have led many to believe that not all the projects will be sanctioned.
Labor shortages and the high cost of construction in the country are largely cited as the biggest stumbling block to further development and still threaten to curtail the development of the industry. Numerous expansions and developments have already been shelved due to an inability to compete with cheaper sources of LNG in other countries.
While Cleary conceded that some of these projects will remain uneconomical, he noted that some of Australia's 820 Tcf of reserves could be tapped through brownfield expansions at existing facilities, which would reduce initial capital expenditure costs.
Floating LNG facilities could also offer an economically efficient way of monetizing small, offshore reserves, Cleary added, as this allows the infrastructure to be imported from cheaper labor markets, such as South Korea, also reducing capital expenditure.
"That this is not the end of Australian LNG. Australia will have a next phase of LNG production," Cleary said.
