Page 4 - GLNG Week 48

GLNG COMMENTARY GLNG
ExxonMobil cancels Australian LNG import project
The US super-major shelved the project owing to a lack of buyer interest, underlining the problems facing other such projects
PERFORMANCE
WHAT:
The Victorian project was one of ve proposed for the country’s south-east.
WHY:
Gas shortages have been predicted within the next ve years.
WHAT NEXT:
Industry will likely continue lobbying for gas export controls.
EXXONMOBIL said this week that it was aban- doning plans to build an LNG import terminal in Australia’s south-eastern state of Victoria. e US super-major cited a lack of buyer interest in longer-term supply contracts as being the down- fall for the project.
e proposed terminal was one of ve on the drawing board and its cancellation underscores the challenges facing the country’s other import developments, all of which are still to reach a nal investment decision (FID).
Industrial and residential gas consumers have long been disgruntled over soaring gas prices and the prospect of importing gas, despite fore- casts of an impending supply shortfall, will likely lead to some serious political fallout. e pros- pect of government intervention, either to curb exports or ringfence a share of production at the wellhead for the domestic market, has le buyers uneasy about committing to 10-year contracts.
Odd choice
Import projects may at rst glance seem an odd choice for Australia, given that the Department of Industry, Innovation and Science (DIIS) pre- dicts that LNG exports will rise from 75m tonnes in nancial year 2018-2019 to 82mm tonnes in 2019-2020. But rising local gas prices, with man- ufacturers blaming gas costs of up to AUD12 ($8.21) per gigajoule for factory closures in Aus- tralia’s south-east, have created a business case for such projects.
The other four proposed projects include Australian Industrial Energy (AIE) and South Korea-based EPIK’s plans for each of them to launch a terminal in New South Wales, Venice Energy’s development in South Australia and AGL’s undertaking in Victoria.
ExxonMobil, however, said this week that a er having undertaken an “extensive study” to determine the potential for LNG imports, it had found consumers’ receptiveness to longer-term supply contracts insu cient to support an FID.
“ ere was insu cient interest from poten- tial customers,” the Sydney Morning Herald quoted a company spokesman as saying this week. “At this stage, we have not received su - cient market interest to advance an LNG import project; however, we will continue to assess the
market and work with customers to meet their supply needs.”
Market uncertainty
e daily quoted the CEO of energy consultancy EnergyQuest, Graeme Bethune, as saying con- sumers preferred shorter-term deals owing to uncertainty “hanging over the market”.
He was referring not just to the Australian Domestic Gas Security Mechanism (ADGSM), introduced in 2017 as a means of limiting exports from projects that were running at a gas de cit to the local, but also to the government’s review of the mechanism that could lead to greater supply controls – such as a gas reservation policy.
“You’ve got industrial customers particu- larly hanging o , hoping for a silver bullet to be delivered,” he said. “Customers have only been contracting for relatively short periods – the typ- ical seems to be two or three years as opposed to 10 years – because of uncertainty about where prices might go and what the federal govern- ment might do or not do.”
Resources Minister Matthew Canavan and
Energy Minister Angus Taylor said on August
6 that they would review a range of policies
in order to come up with options by February
2021. ese will include gas reservation, pipeline The US super- access and price transparency.
“Past approvals of large gas export projects
have not adequately considered the impact on
the domestic gas market and that has contrib-
uted to some of the pressures we have seen in
recent years. We cannot a ord to repeat these pastmistakes,”thetwoministerssaidatthetime. supply contracts
is uncertainty has already been felt at AIE’s project.
Buyer hesitation
The company said in November that its pro- posed Port Kembla terminal was facing delays a er it had struggled to lock in buyers. AIE is backed by Japan’s JERA and Marubeni, as well as Australia’s Squadron Energy.
Squadron’s CEO, Stuart Johnson, told Reuters that potential buyers had been reluctant to sign long-term contracts, owing to uctuations in local prices.
As of June, AIE had lined up EnergyAustralia
as being the downfall for the project.
major cited a lack of buyer interest in longer-term
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w w w . N E W S B A S E . c o m Week 48 05•December•2019