AN aerial view of the QCLNG site on Curtis Island.
AN aerial view of the QCLNG site on Curtis Island. Brenda Strong

Gas giants assure everything is okay despite rising costs

Energy outlook: Australia to become 'the next Qatar' in gas exports

COST blowouts on Gladstone's LNG projects are making the news around the world, but if you ask the companies, they might answer the question with a question - "What blowouts?"

The Observer asked the three current proponents how they had fared in relation to cost blowouts. All said their projects were on a solid financial footing.

GLNG, QCLNG and APLNG were positive about the economics of their projects on Monday.

However, it is no secret costs have risen higher than expected, mostly due to the high Australian dollar.

Santos CEO David Knox, whose company is building GLNG on Curtis Island, told a conference in Sydney on Monday costs were becoming an issue for major projects.

"Australian projects are getting more expensive," he said.

"The Australian LNG projects currently under construction are now 80% more capital intensive than those already in operation.

"A lot of this cost is labour, with the cost of Australian labour double that of many of our competitors, and productivity in most cases lower."

A seemingly extreme case is QCLNG, which has revised its budget from $US15billion to $US20.4billion.

A QCLNG spokesperson said the increase was caused by increased costs for local goods and services, regulatory compliance and a 20% appreciation in the Australian dollar.

The main message from the three LNG giants on Curtis Island was just relax, everything is under control.

QCLNG has had to increase its budget by $US5.4billion.

That figure looks terrifying in US dollars, but it is mostly caused by the sky-rocketing Aussie dollar.

A spokesperson said the project was in good shape.

"These cost pressures are not out of keeping with what we've seen in the broader market in Australia," he said.

"QCLNG is a project with sound economics and we remain firmly on track for first LNG in 2014."

APLNG has also been at the centre of speculation, with reports its budget had risen from $US20b to $US23b.

The company rejected that interpretation.

"There has been no significant change in the cost of the Australia Pacific LNG project from that announced in July 2011, which was $US20billion or $A23billion, other than as a result of movements in foreign exchange rates," a spokesperson said.

GLNG also said the $US2.5billion increase to its budget looked worse than it was and was caused by the rising Aussie dollar.

GLNG is an Australian dollar nominated company, which said provided a buffer against currency changes.

Australia set to become 'the next Qatar' in gas exports

THE cost increases come as the Federal Government's carbon tax was endorsed by the head of the International Energy Agency on Monday.

The IEA releases an outlook for the world's energy markets, outlining the risks and opportunities for the world's energy markets to 2035.

The agency's executive director Maria van der Hoeven was in Canberra on Monday, outlining the future for Australia in the global market.

She said the agency applauded the government's carbon price as an essential part of reducing energy demand.

But Ms van der Hoeven said the carbon price was only part of what would drive markets over the next 23 years.

She said energy efficiency was the integral ingredient that would ensure the globe could keep demand in line with supply, along with moving towards less fossil fuel based power generation.

But despite the need for renewable technology, she said the future was still bright for Australia's core exports, in coal and coal seam gas.

The agency's latest outlook revealed global demand for power would grow from 12,380Mtoe in 2012 to 16,730Mtoe in 2035, much of it driven by gas and coal.

Ms van der Hoeven said the 60% rise in demand would be driven by China, India and the Middle East, with coal demand up 21% and natural gas up 50%.

She said Australia's role in the global energy trade would grow from being the world's largest coal exporter, to being the world's biggest gas exporter.

Ms van der Hoeven said Australia could be "the next Qatar" in gas exports, all in the next eight years, to 2020.

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