Canadian LNG firms eye Australia as a 'cautionary tale'
AUSTRALIA'S LNG industry has been used as a cautionary tale at an energy summit in Canada.
At the Western Energy Summit in Calgary earlier this month, IHS CERA associate director Jihad Traya tempered any excitement among attendees that exporting liquefied natural gas from Canada's shores would bring back natural gas prices from the dead.
"LNG is not a panacea," Traya told the audience during a session focused on understanding North American oil and gas fundamentals and Asian demand.
A report on the conference on the Alberta Oil website said proponents of Canadian LNG export projects were looking at Australia to get a greater sense of what could happen in the middle of an LNG boom.
"Just like Canada, the Aussies have a number of LNG export projects in the hopper, with seven onshore and five floating LNG facilities under construction," the report said.
"But in a report released this week, London-based research and consulting firm GlobalData points out that while the Australian LNG sector has massive financial potential, ballooning development costs, driven by the prodigious strength of the Australian dollar, are continuing to chip away at profit forecasts."
GlobalData's leading upstream analyst for the Asia-Pacific region said the Australian government might be set to add another challenge.
"Jonathan Lacouture points out in the report that while the companies building these projects prefer to sell LNG to the likes of Japan and South Korea who will pay a premium for it, Australian markets are short of natural gas.
"Lacouture suspects the Australian government might do something to rectify that in the next five to 10 years and introduce a domestic sales quota for the LNG projects.
"At a time when the massive Greater Gorgon project's price tag has jumped from US$39 billion to US$52 billion, government-mandated sales quotas won't help the profit margins of Aussie LNG export schemes, Lacouture says."
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