The Australian Energy Market Operator (AEMO) engaged Core Energy Group to review the outlook for liquefied natural gas (LNG) in Eastern and South Eastern Australia. This report, which provides a review of the global LNG market with a focus on Asia, discusses the competiveness of Eastern Australian LNG development to meet LNG demand, and projections of LNG development under several possible scenarios.
Information provided in this review will also support the development of modelling inputs for the 2012 Gas Statement of Opportunities (GSOO).
The database supporting the figures and tables throughout this report can be accessed here.
Projected LNG trains in Eastern Australia and their gas demand
The Core Energy review shows there will be growing demand for LNG export from Australia. This will lead to six to ten trains being built over the next 20 years, with a capacity of 25.4 megatons to 40.4 megatons under various scenarios, requiring gas reserves of between 33,000 petajoules and 53,000 petajoules.
The analysis also shows that growth will likely not continue after 2021 due to competition from possible LNG development in other suppliers.
Projected LNG development
- Regional LNG market outlook
Over the last 10 years, the global LNG trade has a compound annual growth rate of 8.5%, with the Asia Pacific LNG market accounting for nearly 60% of total world LNG demand in 2010.
Ninety-nine per cent of Australian LNG export currently goes to the Asian region, and has a compound annual growth rate of 2.8% under the Asian LNG demand Reference scenario.
Over the next 20 years, contracted supply to the Asian LNG market is trending down, while uncontracted demand and unfulfilled demand are trending up. The compound annual growth rate of unfulfilled LNG demand in the Asian market is 8.6%, growing from 28 megatons in 2012 to 146 megatons in 2032, which is available for Eastern and South Eastern Australian LNG projects to compete for.
- LNG development competitiveness
Eastern and South Eastern Australian LNG projects have a number of advantages over other competing suppliers:
- Australia’s vicinity to the Asian market and resulting lower shipping costs.
- Low sovereign risk.
- Advanced progress of several projects, particularly for the time horizon up to 2017.
There are currently three projects involving five committed trains with a total capacity of 20.8 megatons. The available information shows there are potentially an additional 18 to 33 trains under a number of proposed projects. However, between six and ten trains are projected to be built within the next 20 years under three domestic economic scenarios:
- The Decentralised World scenario, with six trains up until 2016, and a total capacity of 25.4 megatons.
- The Planning scenario, with eight trains up until 2017, and a total capacity of 33.4 megatons.
- The Slow Rate of Change scenario, with ten trains up until 2021, and a total capacity of 40.4 megatons.
Core Energy projects that there are no additional trains to be built between 2021 and 2032 because of competition from other suppliers with potentially lower production costs (such as the United States and Canada), and the economic benefits associated with liquids production from Western Australia and the Northern Territory.
The reserves required to meet demand from the number of trains projected over the next 20 years range from 33,000 petajoules to 53,000 petajoules.
Eastern and South Eastern Australian reserves are anticipated to be sufficient to meet this demand.