Australian investors are coming around to the realisation that energy will be the next big sector to drive the economy. In the beginning, when the LNG projects were in the planning and initial development stages, it was still a bit of a punt on how they would play out.
Talk of Australia becoming the next world leader in LNG exports sounded great, but the proof is in the pudding. Well, the first batch of that “pudding” is about to come out over the next year and has started just this month.
Two big energy companies are at the forefront as some of the first movers in the next production phase. LNG will start flowing fast to export markets like China, Japan, Korea and South East Asia in the short-term.
1) LNG export earnings expansion
Oil Search Limited (ASX: OSH) kicked off it first LNG shipment in May, being one of the first movers in exporting gas amongst the several major LNG projects that will be coming online in the next 12-18 months. The company projects that its production output will rise four times once it reaches full capacity.
Origin Energy Limited (ASX: ORG) will see its Australia Pacific LNG project (APLNG) achieve first LNG around mid-2015, so before too long it will realise an increase in export earnings. Both companies are expected to have a step-change rise in earnings as production expands at a quick rate.
2) Further LNG processing expansion to follow
Both Origin Energy and Oil Search will be developing more LNG trains, or processing facilities, to ramp up production. Origin’s project has one more train expected to be online later in 2015. Oil Search sees the potential of two more trains that could even double the high 2015 projected output.
3) Developing new oil and gas resources
Oil Search plans to use its extra revenue to help fund acquisitions of adjacent oil permit areas to its PNG LNG project and leverage the assets already in place. Origin Energy is working with other oil producers like Beach Energy Limited (ASX: BPT) and Senex Energy Ltd (ASX: SXY) in the Cooper Basin in SA and Queensland to develop oil and unconventional gas to supply its LNG plants with new, affordable gas resources.