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LNG the next ‘boom’

Liquefied natural gas (LNG) looks set to become our most important export over the next five years, as the resources boom slowly deflates, and several LNG projects come online.

According to the Bureau of Resources and Energy Economics (BREE), earnings from mineral commodities are now expected to peak in 2014-15 due to declining commodity prices, particularly iron ore, which will be offset by increased volumes.

Australia currently exports 24 million tonnes per year, but has around 60 million tonnes of liquefaction capacity to come online by 2017. Exports are expected to increase at an average rate of 36% a year to reach 88 million tonnes in 2017-18, while the value of exports is expected to climb from $16 billion this year to over $52 billion in real terms by 2017-18.

Australia currently has several LNG projects in various stages of development or planning. In 2012, Woodside Petroleum’s (ASX: WPL) Pluto LNG plant in Western Australia came online, placing it ahead of BHP Billiton as the country’s largest petroleum producer. Woodside is expected to announce its plans for its next LNG project, Browse, also in Western Australia, by the end of June this year.

On the other side of the continent, Origin Energy (ASX: ORG) is taking part in the $23 billion Australia Pacific LNG plant at Gladstone, in Queensland. Oddly, another two LNG plants are also being built at Gladstone, with Santos Limited’s (ASX: STO) Gladstone LNG project expected to ship its first gas in 2015, while the Queensland Curtis Island LNG plant, owned by BG Group, is expected to start shipping LNG as soon as next year. Both the latter LNG plants are fairly unique in using coal seam gas as the source, versus traditional sources.

Other LNG projects include Inpex’s Ichthys LNG project on target for first shipment in 2017, Woodside’s Browse project, which is facing political issues regarding processing and Chevron’s Gorgon and Wheatstone LNG projects, expected to come online in 2015 and 2016 respectively.

Of course Australia may not have it its own way for long, with plans for LNG projects sprouting up all over the world, including Africa, the US, Israel, Santos and Oil Search Limited’s (ASX: OSH) LNG Project in Papua New Guinea as well as Indonesia.

Foolish takeaway

Australia may have got the lead march on other countries, and our proximity to Asia and the highest demand countries of Japan, Korea and China make us ideally placed to become the world’s largest LNG supplier. For investors, there may be opportunities to invest in either the LNG project participants or the gas explorers and producers.

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More reading

The Motley Fool’s purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead.  This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. Motley Fool writer/analyst Mike King owns shares in Woodside and Origin.

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