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LNG projects: Low in number but high in value

AREEA policy adviser Luke Achterstraat analyses recent government data, offering a critical approach to Australia’s LNG investment pipeline, both now and in future.

INVESTMENT in committed resources and energy projects remains at about $268 billion according to the latest Resources and Energy Major Projects publication from the Bureau of Resources and Energy Economics (BREE). Of that figure, over $200 billion alone is tied up in LNG projects, illustrating that the future of energy globally will depend significantly on Australian oil and gas exports. In fact, BREE estimates that LNG production in Australia will increase 12% in 2013, and with some LNG price forecasts predicting a 25% rise, there is significant value for investors in this space.

Across all commodities in Australia, there are 73 committed projects in the pipeline. Of those, 40 are minerals projects, 18 are gas and petroleum projects, and 15 are infrastructure projects.

High value projects continue to be the main driver of the record high levels of committed investment in the resources and energy sectors. Mega projects valued at over $5 billion account for around 80% of the $268 billion in committed investment.

However, BREE estimates that around $150 billion of high value projects have been delayed or cancelled in the last 12 months, while cost increases to committed projects currently account for 11% of the stock of committed investment.

Faced with a high Australian dollar, increased costs of both labour and capital, and falling commodity prices, the Australian resource industry is at a crossroads. The strong performance of Australia’s LNG sector is encouraging but more needs to be done by way of industrial relations reform, investment in skills and greater policy transparency to maximise the opportunities in our entire resource investment pipeline.

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