Business

Fears for Arrow as analyst says new LNG plants cost double

ARROW LNG may not go ahead as a standalone project, with an analyst working with Arrow saying Australian projects could halve their costs if they join current projects rather than build new ones.

Deloitte analyst Geoffrey Cann could not comment specifically on the $17.4 billion Arrow project proposed for Curtis Island, that the high cost of labour and the threat of competition from the US meant "brownfield" expansion was the best option for the sector.

Analysts have speculated that gas from Arrow's coal seam gas fields in the Surat and Bowen Basins could make its way into an expansion of one of the existing Curtis Island projects rather than Arrow building an entirely new plant.

"The biggest opportunity for Australia's onshore plants is in brownfield expansions and de-bottlenecking," he said.

The Gladstone LNG industry is already hard at work to alleviate those bottlenecks, as demonstrated just last week by the deal struck between APLNG and GLNG.

The two project players signed off on an agreement to share a coal seam gas pipeline from south-west Queensland to Curtis Island, meaning savings for both players.

Despite the best efforts of the local industry, new Australian LNG projects are still viewed as expensive by the big multi-nationals holding the purse-strings.

Mr Cann said Australian "greenfield" projects (or projects from scratch) were currently running at about $1500 per tonne of LNG produced.

By contrast, proposed projects in the US are running at about $600 to $900 per tonne.

"Australian projects in general are seen as some of the most expensive in the world right now, and there's really nothing on the horizon to suggest that costs are about to come down," Mr Cann said.

He said that costs associated with Australian brownfield projects, however, would be "more or less" on par with their US counterparts.

He said the main cost imposts on greenfield projects was needing to build infrastructure from scratch and the cost of labour.

According to consultancy Hays, the average oil and gas worker in Australia took home an average of just over $174,000 in 2012, compared with figures of $126,400 for workers in the US.

Mr Cann said the high cost of labour combined with lesser productivity in Australia compared with the US did not make good reading for any body trying to build a new project in Australia.

"So Australia's a good solid 20% to 25% higher than North American wage rates, which would be okay if we had 25% greater productivity, but we simply don't," Mr Cann said.

Arrow could not comment before deadline.

Read more: Full interview this Saturday in The Observer's Weekend section.

Topics:  arrow energy, coal seam gas, curtis island, gladstone industry, lng



'Loaded' hourly rates could replace penalty rates

PENALTY RATES: Workers could get more an hour to fore go weekend penalty rates.

DO YOU rely on penalty rates to make ends meet?

BREAKING: Gladstone man flees court

Police are looking for this man

33-year-old man wanted by police

Emergency services held up in woman's rail line 'sieges'

Police generic

Woman's late night antics puts Gladstone rail under 'siege'

Local Partners

Marvel's Luke Cage S1E4: Step In The Arena review

Mike Colter in a scene from the TV series Marvel's Luke Cage. Supplied by Netflix.

*WARNING: spoilers if you haven't seen Marvel's Luke Cage*

Rob Kardashian admits his first crush was his sister Kim

Rob Kardashian once had a crush on his sister Kim Kardashian West.

Marvel's Luke Cage S1E3: Who's Gonna Take The Weight

Mahershala Ali in a scene from the TV series Marvel's Luke Cage. Supplied by Netflix.

*WARNING: spoilers if you haven't seen Marvel's Luke Cage*

Marvel's Luke Cage S1E2: Code of the Streets review

Simone Missick and Mike Colter in a scene from the TV series Marvel's Luke Cage. Supplied by Netflix.

*WARNING: spoilers if you haven't seen Marvel's Luke Cage*

Kim Kardashian West 'sick of talking about Taylor Swift'

Kim Kardashian West is sick of talking about Taylor Swift.

Justin Bieber ordered to attend Miami deposition

Justin Bieber has been ordered to travel to Miami for a deposition

Beach-side real estate starts at $85k on Fraser Coast

HERVEY BAY REAL ESTATE: You can buy this townhouse in Scarness for under $300k.

Live your beach-living dream locally.

$40million hotel, shops development project for Mackay

Mt Pleasant hotel and retirement accommodation, proposed at 194-202 Malcomson St.

$40m development to take Mackay to 'the next level'

'Flex muscles': Gladstone suburb drops $120K

BUYERS are scooping unprecedented deals by “flexing their muscles at the table”

Few bright lights for property after mining downturn

The Gladstone Regional Council wants associated LNG companies like Bechtel to be apart of the EIS housing accommodation strategy from the outset of the projects and not mid-way through.

Tannum Sands continues to write its own property success story

Property 200m from ocean selling for just over $100K

BEACHCOMBER PARK: Work has started on a new $19.2 million development at Toogoom.

The estate's developer is offering huge discounts for early buyers.

UPDATE: Former rodeo champ's sale rained out, now back on

Larkhill local Ken Consiglio is having an auction of most of the things on his property.

'People kept showing up and we had to turn them away'