Morgan Stanley: LNG will Turn Australia into an Energy Superpower by 2017

Morgan Stanley believes that by the middle of the decade Australia will be a global energy superpower thanks to increases in its natural gas exports, allowing it for the first time in nearly 40 years, to eliminate a current account deficit.

They expect LNG production to increase vastly as huge projects start to come online and turn Australia into the world’s largest exporter of LNG by 2017, overtaking Qatar.

In a recent report the bank claimed that “liquefied natural gas (LNG) exports from Australia could be the next big thing.”

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In recent times, two-thirds of the world’s increase in LNG trade capacity has come from Australia, and although the US produces more natural gas, it will take five to ten years before they have the infrastructure and export terminals to begin selling significant amounts on the global market.

Until then, Australia will have a chance to secure a strong position in the huge Asian market, where demand is high, mostly due to China’s attempts to leave coal and Japan’s desire to find an alternative to nuclear power.

Geoffrey Kendrick, the East Asian expert at Stanley Morgan, explained that “the ramp-up would be enough to see Australia record a current account surplus in 2015, the first since the second quarter of 1975. It is difficult to overestimate the long-term structural importance of this industry to Australia.”

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Australia does hold huge reserves of natural gas, however, some people are dubious as to how easily they could increase their LNG output as high costs in the country are making projects less profitable and deterring some companies from developing projects there. The Gorgon LNG project on Barrow Island, being built by Chevron, Shell, and ExxonMobil, has seen costs rise from $37 billion to $54 billion.

The Telegraph reports that Australia is one of the last remaining AAA states left in the world, yet this status is in jeopardy. The country’s external liabilities stand at US$855 billion and its net international investment position is minus 64 percent, when normally the IMF claims minus 30 percent acts as a warning signal.

The boost in LNG exports could help boost Australia’s economy and stabilise its external balances and strengthen its sovereign wealth fund.

By. James Burgess of Oilprice.com