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Australia's LNG projects face major delays – part one

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LNG Industry,

Reuters is reporting that Australia's plans for a huge increase in its production of LNG are being dealt a big blow by a series of production delays, as energy companies struggle with technical problems and cost overruns.

The country is still likely to become the world's biggest LNG exporter, sending out approximately 85 million tpy by the end of 2020, up from 30.7 million t in 2015 and 45.1 million t in 2016. However, the pace of growth is much slower than expected due to higher-than-expected costs that have delayed plans to start or increase LNG exports from four megaprojects, Gorgon, Ichthys, Prelude and Wheatstone, all along or off the coast of northwest Australia.

Now at least three of them, Shell’s Prelude floating LNG production vessel, Inpex’s Ichtys project, and the expansion of Chevron’s Gorgon operation, will not begin exporting until 2018 or even later, rather than 2017 as previously planned.

It should all be a boon for other suppliers of LNG to Asian buyers, such as utilities in the region. These suppliers can also benefit from higher prices.

Traders said that the beneficiaries include US-based Cheniere Energy with its facility at Sabine Pass in the Gulf of Mexico, and global energy giant Exxon Mobil with its production in Papua New Guinea.

To make matters worse, the producers in Australia are having to go to their rivals to fulfil contracts.

Once completed, the four projects will have a combined annual LNG capacity of 36.5 million t. The development costs will total US$130 billion.

One problem the LNG project developers have pointed to in explaining production delays is that they struggle to find enough qualified and experienced staff.

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