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Australian project review shows

onshore’s attraction over offshore

A government review of commodity investment has shown that
spending on onshore gas projects has overtaken that in the offshore

COMMENTARY THERE is growing uncertainty surrounding investment pipeline had climbed by 19% year on
future investment in Australia’s commodity sec- year to 335, while their value had increasing by
tors, with a growing number of developments 4% to AUD334bn ($246.19bn).
WHAT: that were once thought possible now being The country’s committed projects accounted
A growing number deemed as increasingly unlikely. for AUD39bn ($28.75bn), with hydrocarbon
commodity projects are A new report by the Department of Indus- projects comprising 51% of that figure. The
no longer expected to try, Science, Energy and Resources this week department noted that commitment values had
reach FID. has highlighted that while hydrocarbon projects climbed by 30% y/y, bringing an end to six years
make up more than half of the country’s commit- of decline as several large LNG projects were
WHY: ted commodity developments, financial invest- completed and not replaced.
Budget cuts and ment decision (FID) delays at a number of mega The surge was attributed to the progression
depressed demand projects underscore continued investor wariness of three major gas projects to the committed
have undermined their to commit while international oil and gas prices stage, including the first phase of Arrow Ener-
investment case. remain depressed. gy’s AUD10bn ($7.37bn) Surat gas project, the
Where once the country’s offshore gas devel- second phase of the Julimar-Brunello project
WHAT NEXT: opers dominated the picture in terms of capital and the third phase of the Greater Western Flank
While offshore FIDs may expenditure, the annual Resources and Energy project. While the Surat project will supply the
be delayed for some Major Projects report revealed that onshore pro- domestic and export markets, the other two will
years, onshore projects jects had attracted a greater level spending for the only support LNG production at Wheatstone
are likely to progress first time in more than 30 years. This tracks with and North West Shelf (NWS) respectively.
more quickly. mounting concern over a domestic supply shortfall The department, however, noted that the
predicted to arrive within a few years. Indeed, given rise in committed project value could reflect
continued uncertainty on the international mar- the increase in expansion and reactivation
ket, the shift in investment focus towards onshore projects, which require lower capital invest-
projects that can feed both local and international ment, potentially fewer approvals and have
demand may well continue. less technical risk.
Indeed, the commodity sector’s reduced
Pipeline progress appetite for risk was on show in the reduced
The report noted that in the 12 months to Octo- value of projects considered likely or even pos-
ber 30 the number of commodity projects in the sible of reaching an FID.

The NWS LNG project.
Image: Woodside Petroleum

Week 47 26•November•2020 www. NEWSBASE .com P11