Most Australian LNG project operators have opted to delay their final investment decisions (FIDs), deciding to wait for the medium-term market reaction and then act accordingly.
This has limited the scope for future LNG growth in the country, claimed analytics company, GlobalData.
According to GlobalData, delays in LNG projects, such as Woodside’s Scarborough and Santos’ Barossa field, have resulted in a reduced forecast for future LNG growth.
The FIDs delays for backfill projects also raises the prospect of greater spare capacity than previously anticipated, as production from the existing Pluto and North West Shelf developments decline. The North West Shelf participants recently agreed to process third party gas from the onshore Waitsia field but this will not make up from the two-year delay to Browse, now not expected until 2028 at the earliest.
The delays bring into question the necessity for expansions at the Burrup Hub, at least to the extent currently announced. By the time the Scarborough field comes online, there may be enough spare capacity at the existing LNG facilities to accommodate its production, presenting an alternative to the $6.1 bill expansion at Pluto, GlobalData said.
In a look at Canada, GlobalData said significantly low gas prices and the global LNG supply glut caused by COVID-19 has led to a delay in upcoming LNG projects in the country.
Rising competition amid a supply overhang might make it challenging for Canadian LNG producers to remain cost competitive.
GlobalData’s Haseeb Ahmed, commented: “One victim of the sharp fall in gas prices and surplus supply of LNG is the Pieridae Energy’s Goldboro LNG export project, which saw delays to its financial investment decision (FID) in April - with its start year likely to be pushed to 2025. However, the company is upbeat about investing once the market conditions improve, which can allow it to analyse the situation better.”
Participants in Canadian LNG projects, such as Shell, Chevron Corp, Petroliam Nasional Bhd, and Woodside Petroleum, have revised their capex guidance. In February, 2020, Woodside wrote down $720 mill in the Kitimat LNG project in which the company owns a 50% stake.
Ahmed added: “Canada’s LNG sector needs to come up with strategies to thwart competition from the US, which is expected to become more self-sufficient in terms of natural gas production. The kind of unconventional gas reserves in the country and the technological advancement in drilling can propel growth prospects of the Canadian LNG sector.
“Strategic initiatives focusing more on exports, achieving economies of scale by increasing operational efficiency, and investing in disruptive technologies, such as analytics and robotics, can help the LNG sector to tide-over the current scenario.
“Although the LNG market faces similar challenges across the globe, it depends on how Canada’s LNG sector adapts to the current economic situation to sustain in the long-run,” he said.