Page 9 - GLNG Week 47 2020

GLNG COMMENTARY GLNG

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

INVESTMENT THERE is growing uncertainty surrounding
future investment in Australia’s commodity sec-
WHAT: tors, with a growing number of developments
A growing number that were once thought possible now being
commodity projects are deemed as increasingly unlikely.
no longer expected to A new report by the Department of Industry,
reach FID. Science, Energy and Resources this week has
highlighted that while hydrocarbon projects
WHY: make up more than half of the country’s com-
Budget cuts and mitted commodity developments, financial
depressed demand investment decision (FID) delays at a number
have undermined their of mega projects underscore continued investor
investment case. wariness to commit while international oil and
gas prices remain depressed.
WHAT NEXT: Where once the country’s offshore gas devel-
While offshore FIDs may opers dominated the picture in terms of capital The North West Shelf
be delayed for some expenditure, the annual Resources and Energy domestic and export markets, the other two will project
years, onshore projects Major Projects report revealed that onshore only support LNG production at Wheatstone
are likely to progress projects had attracted a greater level spending and North West Shelf (NWS) respectively.
more quickly. for the first time in more than 30 years. This The department, however, noted that the rise
tracks with mounting concern over a domes- in committed project value could reflect the
tic supply shortfall predicted to arrive within a increase in expansion and reactivation projects,
few years. Indeed, given continued uncertainty which require lower capital investment, poten-
on the international market, the shift in invest- tially fewer approvals and have less technical
ment focus towards onshore projects that can risk.
feed both local and international demand may Indeed, the commodity sector’s reduced
well continue. appetite for risk was on show in the reduced
value of projects considered likely or even pos-
Pipeline progress sible of reaching an FID.
The report noted that in the 12 months to Octo- The department said that while the value of
ber 30 the number of commodity projects in the projects in the publicly announced and feasibil-
investment pipeline had climbed by 19% year on ity stages of development that it considered likely
year to 335, while their value had increasing by to reach FID had climbed by 8% to AUD102bn
4% to AUD334bn ($246.19bn). ($75.18bn), those in the possible category had
The country’s committed projects accounted fallen by 20% to AUD119bn ($87.71bn) and the
for AUD39bn ($28.75bn), with hydrocarbon value of those deemed unlikely had soared by
projects comprising 51% of that figure. The 83% to AUD72bn ($53.07bn).
department noted that commitment values had With more than half of this potential invest-
climbed by 30% y/y, bringing an end to six years ment tied up in just 12 mega projects, disrup-
of decline as several large LNG projects were tions to just one or two could have serious
completed and not replaced. implications for the investment outlook of the
The surge was attributed to the progression of country’s commodity sector.
three major gas projects to the committed stage,
including the first phase of Arrow Energy’s FID delays
AUD10bn ($7.37bn) Surat gas project, the sec- The largest of these mega projects is Woodside
ond phase of the Julimar-Brunello project and Petroleum’s Browse to North West Shelf (NWS)
the third phase of the Greater Western Flank project, which carries an estimated price tag of
project. While the Surat project will supply the more than AUD30bn ($22.11bn). However, the

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