LNG prices to dip, here’s how it will affect our region
LIQUEFIED Natural Gas (LNG) exports have been strong throughout the past decade, but now there are concerns about its viability in the future.
According to the Department of Industry, Science, Energy and Resources, the value of Australia’s resources and energy exports set a record of $293 billion in 2019-20, up from $281 billion in 2018-19.
The resources sector, including oil and gas, accounted for more than a quarter (28 per cent) of Australia’s GDP growth in 2019.
LNG exports have more than doubled over the last few years and are contributing significantly to this growth.
LNG is Australia’s second largest export after iron ore, with export value estimated at $47.4 billion in 2019-20 but this is forecast to decline to $35 billion in 2020-21 due to lower prices.
APPEA Chief Executive Andrew McConville said the data highlighted the significance of LNG exports for sustaining Australia’s economic growth, maintaining living standards and lowering global carbon emissions.
“Australia’s LNG projects will deliver decades of economic growth, jobs and exports,” he said.
The billions of dollars invested in these projects have also benefited the growing domestic market.
“There is a great opportunity for Australia but, in a competitive global market, we cannot become complacent.”
The report identified significant challenges for the industry due to the COVID-19 pandemic and global competition.
“The LNG industry is facing the triple whammy of lower oil prices, demand destruction due to the COVID-19 pandemic as well as global competition in the LNG market,” Mr McConville said.
The industry’s success from 2009 to 2012 was thanks to a relatively stable regulatory and fiscal regime over the previous decade, according to a recent Wood Mackenzie report.
The report found that recent regulatory instability, intervention and uncertainty, coupled with Australia being considered to be a high-cost destination for business, has reduced the investment appetite.
“For decades, our industry has contributed to our national economic growth, but there have been no new LNG projects approved since 2012 and we risk losing future investment, Mr McConville said.
“We must act now to restore and maintain investor confidence, or lose the opportunities our abundant natural resources afford the nation.”
What this means for the Surat Basin
A Toowoomba and Surat Basin Enterprise (TSBE) spokeswoman said that changes in the CSG industry could potentially impact communities in the Surat Basin.
“The potential of CSG projects delayed or extraction reduced, could have an impact on employment and SMEs who supply products and services into CSG,” the spokeswoman said.
“Businesses in Western Downs and Maranoa have been impacted in different ways.
“Some businesses have had to pivot and work in different industries, whereas for some it is business as usual and other service providers are busier than average.”
The spokeswoman said that agriculture, mining of resources, and exports could potentially help the economy weather any effects of CSG decline.
Shell QGC believes the demand for CSG will remain strong, even with the transition to renewable and environmentally-friendly industries.
A Shell spokeswoman said there will be more projects in the pipeline for the Surat Basin.
“We will continue to invest to meet the needs of our customers for more and cleaner energy,” the spokeswoman said.
“This can be seen in the Surat Basin, where we have recently announced significant investments in Shell’s Gangarri large-scale solar farm near Wandoan and phase one of Arrow’s Surat Gas Project.
“The Arrow Surat Gas Project is further underpinned by a 27-year Gas Sales Agreement to supply gas to Shell’s QGC business.”
Shell QGC employs over 600 people either directly or indirectly across the Surat Basin.
A spokeswoman for Lock the Gate Alliance said the continued expansion of gas projects in the Western Downs, in particular, could compromise productive farmland.
“The farmland on the Western Downs is some of the most productive in the world, and it is a great shame that parts of it, and the underground water that supports farming in the region, have become compromised due to the unconventional gas industry,” the spokeswoman said.
“Last year, the Underground water impact report (UWIR) for the Surat Basin revealed that more than 100 farming bores in the Surat Basin had been drained due to CSG.”
She said the decline of the gas industry could mean new and sustainable industries could take its place.
“Unfortunately, many long term farming families have left the region since the arrival of the fly-by-night unconventional gas industry, so this latest economic downturn will hit many Western Downs communities hard.
“We applaud recent calls from local leaders to plan well in advance for the economic transition as the gas industry inevitably closes down.”