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Fortescue Metal’s chairman Andrew Forrest and two Japanese utilities plan to build an LNG import terminal in New South Wales by 2020 to help alleviate an energy crunch in Australia’s most populous state. Bloomberg reports that the terminal will have an annual capacity of 2 million tons of LNG. The project will include offshore gas production facilities as well.
The energy supply crunch has come amid soaring gas exports that, as has happened with other major exporters, have shrunk local supplies, causing price spikes. In Australia last year, things got so bad that gas on the domestic market was much costlier than exports to Japan.
Forrest will take part in the project via his private company Squadron Energy, in partnership with Japanese Marubeni Corp. and Jera, which is a joint venture between Japanese utilities Tepco and Chubu Electric Power Co.
Australia is currently the world’s second-largest LNG exporter after Qatar. This year, exports of the fuel are seen to reach 63 million tons annually, consultancy EnergyQuest said, as the second phase of Chevron’s Wheatstone project comes on line along with Inpex’s Ichthys project by the summer.
Recently, S&P Platts quoted industry sources as saying that bans on the development of unconventional gas resources will deepen the supply/demand imbalance in eastern Australia. The warning was in line with one from the International Energy Agency, which said in a recent report that, "Increasing LNG exports have created a tight supply in Australia's eastern market, which is characterized by weak regulation, poor transparency and low liquidity," the IEA said. "Market inefficiencies need to be addressed swiftly and transparency improved rapidly for domestic consumption and LNG exports to successfully coexist."
One attempt to address the situation was the Australian Domestic Gas Security Mechanism, approved last year, which gave the federal minister of resources the power to put a cap on exports in case of a domestic shortage. This, the IEA said, could increase uncertainty in the regional LNG market and threaten new investments in the industry.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.