Falling oil prices set to hit future LNG price

A BIT of disturbing news for Gladstone and Australia generally a week or two ago.

Since June, crude oil prices have fallen 25% to a four-year low of $US85 a barrel, something you've probably noticed at the fuel pump.

Why this fall is important for Australia is that it will impact on our increasingly LNG-reliant future export earnings.

The reason is that contract prices of all six under-construction LNG plants, three in Gladstone, are linked to crude oil prices.

Break-even for Australian LNG producers is reportedly about $US14 per million British thermal units (mmBtu).

Apparently that's about where the current crude oil price of $US85 per barrel puts us.

Should the barrel price fall further to $US80, then the price for LNG would fall to about $US12 per mmBtu, a loss-making level.

One oil company report I read indicated that because the US had gone headlong into shale oil and gas, the longer term price of LNG will settle on $US12, as the US builds exports to 100 million tonnes of LNG per year in the coming decade and even cheaper LNG from Russia heads into China.

Not a good forecast for us: when the projects started in Australia, the crude oil price was over $US100 per barrel which translates to $US15 per mmBtu - and the future looked rosy.

Recently, BHP sold out of the Browse project in WA and Arrow, under direction from its major shareholder Royal Dutch Shell, shelved its Curtis Island project.

The natural fit in developing gas projects is for oil companies to do the heavy lifting. But they're getting gun-shy.

Our hope for the virulent future export earner we had come to expect LNG to be will depend on Middle Eastern oil producers increasing crude oil prices by reducing production.

That would see fuel prices increase, higher inflation and eventually the threat of higher interest rates.

That's what economics is all about: cause and effect.

Bob Lamont is director of Corporate Accountants, situated at the Night Owl centre. He can be contacted on

Topics:  curtis island gas gladstone business lng oil resources

'F*** off dogs': Crash survivor strikes paramedic

PARMEDIC HIT: Bonnie Brodie assaulted a paramedic called to a crash scene to help her.

Car crash survivor hits paramedic, kicks cop, gets jail - suspended.

Tourism boost with 'hundreds' flocking to Gladstone's CBD

Tannum Sands treasure Maree McLelvie, Gladstone president Hether Wieland and Gladstone vice president Pat Van Bergen with artwork donater by Sue Daw which is just one of the items on auction at next weeks QCWA conference.

More than 300 people will flock to Gladstone next week.

Santos boost sales

CLAWING BACK: Santos reports a strong third quarter position off the back of bigger sales out of GLNG.

Revenue from LNG sales was $US227 million.

Local Partners

PHOTOS: 'Best markets yet': Big sales at CBD markets

THE smell of fresh flowers, fruit and vegetables waft through the Gladstone CBD for the second City Farmer's Markets today.

Your chance to win

Learn More

Former Split Enz front man Tim Finn finds new niche

Singer Tim Finn has written the music for theatre production Ladies in Black.

Musician finds his way to theatre

Barry Gibb is coming to Bluesfest 2017

FANS: Barry Gibb talks to a fan next to a cardboard cutout of his young self.

Aged 70, Gibb has re-launched his solo music career with a new album

Tim Finn headlining at Airlie Beach Music Festival

Music veteran Tim Finn from New Zealand will headline the Airlie Beach Music Festival.

Tim Finn: "It's the kind of festival that artists love"

Azealia Banks won't take legal action against Russell Crowe

Rapper Azealia Banks

Rapper drops legal action against Russell Crowe

Brad Pitt meets with his kids amid divorce proceedings

Actor Brad Pitt

Brad Pitt has met up with his oldest son Maddox

Pictures of Taylor Swift allegedly being groped are sealed

They could "complicate jury selection".

Bruce Springsteen finds therapy useful

Singer Bruce Springsteen

Singer encourages others to seek help

Kerry Washington wants one more child

Kerry Washington recently gave birth to her second child

Kerry has only just become a new mum again

TRAVEL: Musicals light up Sydney

David Campbell performs in Dream Lover.

We take a trip through one of Sydney's finer scenes

Hit songwriter's Noosa mansion on market

SPECIAL PLACE: The Cintamani estate is going to tender, marketed by Tom Offermann Real Estate.

Is this Queensland's best property?

Kiwi siblings snap up Dotcom mansion for $32.5m

The new toy company owners of the Coatesville mansion want replace any controversy with positivity and fun. Photo / Barfoot and Thompson

The trio paid $32.5 million for the property in June

Push to sell homes that flooded Gladstone's market

Suburban housing in Glenvale, Toowoomba, Friday, October 17, 2014. Photo Kevin Farmer / The Chronicle

URGENT push to cash-up first home buyers investing in Gladstone.

New $200 million development will create 580 jobs

Cassie And Josh with baby Alfie and daughter Andee. They have bought at new Lennox Head development Epiq.

Majority of new positions will be given to Northern Rivers locals

Cherrabah's mega resort plans axed

PLANS for a massive development at Cherrabah have been scrapped.

What our mayor thinks of the new draft SEQPlan

The plan to use the innovative technology as part of the new Maroochydore CBD was cemented on site today when Mayor Mark Jamieson and Envac Asia Region president Chun Yong Ha formally signed the contract for the $20 million underground waste collection system.

New plan accommodates Sunshine Coast Council's vision for growth.