GlobalData: Australia and FLNG

An analyst from research and consulting firm, GlobalData, has suggested that Australia should continue to focus on LNG projects rather than ‘gambling’ on floating LNG (FLNG) too soon.

Rebecca Wilson, GlobalData’s Upstream Analyst covering Asia-Pacific, believes that the Australian LNG industry is threatened by unattractively high CAPEX investments, increasing market competition and production from both North America’s shale gas revolution and new international contracts.

These factors, combined with Australia’s current LNG price environment and the prospect that the selling price may continue to fall, could affect investment in the country.

Wilson believes that “Technology allowing for FLNG facilities could reduce initial project costs in the near future, providing much cheaper alternatives to onshore equivalents and potentially transforming the market.”

However, she warns that “The FLNG concept is relatively new and issues are therefore likely to arise, resulting in higher operating expenditure and ultimate CAPEX, and bringing into question just how much the projects will save.”

Calculated break-even prices also suggest that FLNG may not positively impact the market for quite some time

Wilson continues: “Given a number of FLNG projects in the pipeline, the technology is likely to be advanced and improved upon rapidly, further lowering costs and allowing FLNG to eventually become the potential game-changer that it is predicted to be.

“Despite this, it may be necessary for Australia to concentrate on bringing its onshore LNG development prices further in line with those globally, rather than investing in FLNG. This will ensure continued investment in the country’s LNG industry at a time when demand growth is peaking.”

Adapted from press release by Callum O'Reilly

Read the article online at: https://www.lngindustry.com/floating-lng/03122014/globaldata-australia-should-not-overcommit-to-flng-1898/