October 27, 2015
Authors: Olga Kerimova, Analyst, and Theodora Batoudaki, Analyst, Rystad Energy
Publisher: PESGB Newsletter, October Edition
LNG has dramatically changed Australia’s energy landscape, with major projects on track to come online over the next year. This article assesses the outlook for the Australian E&P industry, illustrated by three key drivers: production, resource potential and spending.
Figure 1 shows the total production for Australia, split by project and life cycle, from 2010 to 2025. LNG is the largest contributor to Australian production. Rystad Energy estimates that its contribution will grow from 37% in 2015 to over 60% in 2020. North West Shelf LNG, with first production in 1989, makes up about 35% of the current volumes. The decline in production from mature fields is expected to be offset by APLNG and GLNG that are on track to come online in the third quarter of 2015. Significant contribution to production is also expected from the Chevron-operated Gorgon and Wheatstone that are planned to start production in 2016. Gorgon was originally expected to ship its first cargo in late 2015, but it was delayed due to complications with labour, equipment and weather conditions.
Figure 2 depicts the largest projects in Australia by remaining resources and life cycle. All the projects shown are LNG developments, with most volumes located in the North Carnarvon and Browse basins in the west and the Bowen and Surat basins in the east. In the North Carnarvon Basin, the Gorgon project includes the large Jansz-Io and Gorgon fields that are expected to be put into production next year, while the Browse Basin is dominated by the Inpex-operated Ichthys field with more than 16 Tcf in recoverable resources. The onshore CBM projects, GLNG (Santos-operated), QCLNG (BG) and APLNG (Origin Energy), are estimated to account for over 40 Tcf of Australia’s LNG potential.
Figure 3 shows total spending in Australia over the period 2010-2020. Investments (capex and exploration capex) were increasing from 2010 to 2013 and peaked at over 60 BUSD in 2013. Since then investments are following a declining trend. The main drivers are the large LNG projects: Gorgon, Ichthys and APLNG. APLNG is almost complete and thus the largest part of its development cost is sunk. Similarly, Gorgon is nearing completion, as it is expected to start producing in early 2016, and thus its cost is decreasing. A new investment cycle is expected to start post 2017. The Browse project is leading the second investment cycle, as the investments in this project are estimated to grow from 1 BUSD in 2017 to 4 BUSD in 2020. As of August 2015, Woodside confirms that FID of Browse is targeted to occur in the second half of 2016. However, in general, the development of the oil prices can affect the timing of sanctioning of new LNG projects. The operating costs (opex) are increasing, in line with the ramp-up in production from 2016, and are expected to double by 2020.
The rise of LNG developments has meant the beginning of a new era for the Australian E&P, marked by high-cost projects leading production growth over the next decade. In the short-run, the high investment levels from 2010 to 2014 will result in a substantial increase in Australia’s production from 2015 and onwards, when APLNG, Gorgon, Ichthys and Wheatstone become operational. At the current investment levels, Australia’s production is estimated to nearly double by 2020.
Olga Kerimova, Analyst
Phone: +47 24 00 42 00
Theodora Batoudaki, Analyst
Phone: +47 24 00 42 00
About Rystad Energy
Rystad Energy is an independent oil and gas consulting services and business intelligence data firm offering global databases, strategy consulting and research products.
Rystad Energy’s headquarters are located in Oslo, Norway, with additional research teams in India. Further presence has been established in the UK (London), USA (New York & Houston), Russia (Moscow), Brazil (Rio de Janeiro), Africa as well as South East Asia.