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Australia will maintain LNG dominance: Ferrier

Mr Jérôme Ferrier, Chairman of the French Gas Association and LNG 18 Steering Committee Chairman for next month’s global conference and exhibition in Perth, noted that Western Australia was still in its LNG exporting infancy in 1998 – the only other occasion the internationally significant tri-annual LNG conference event was held in Australia.

“Eighteen years later Perth remains a key city for the oil and gas business and, significantly, the major triennial LNG event is returning to the WA capital as Australia emerges as a major player on the world energy scene – thanks to its LNG exports,”? Mr Ferrier said.

“It is estimated that WA will have around 10 per cent of global capacity and Australia in total will have about 18% when the global LNG industry assembles in Perth on 11 April for the five-day LNG 18 event,”? he said.

Australia has capacity to adapt and react to new LNG market conditions

Mr Ferrier – also TOTAL’s Senior Vice President, Corporate, and the immediate Past President of the International Gas Union – said that while Australia is still a relatively new player in the LNG business, it has demonstrated its capacity to react and adapt to new conditions of fast-evolving markets.

“There is a need for innovations in producing, financing and marketing of gas projects and Australia shows it can muster the skills and the high level of technology and manpower to meet future demands in terms of project developments,”? he said.

“The main feature of the gas business is that it looks on the very long term. The normal duration of a gas purchase agreement is over 25 years. We have to see and anticipate well in advance.

“Our guess is that natural gas and liquefied natural gas both have a bright future ahead and will enjoy new opportunities for growth in the coming years. Australia could become the biggest LNG exporter on the world markets, in competition with Qatar.

“Remaining the world’s leading gas exporter is as complicated as becoming one. Where will the competition come from in the future? Probably from countries with large conventional gas reserves: Russia, Iran and potentially Northern America and East Africa.

“Meeting two key conditions are needed for these new competitors to reach the Top 3: the confirmation of proven reserves from new fields discovered but not yet produced and demand growth opening the way for new supplies. There is a room for all, especially because buyers are looking for security of supply and diversification.”?

Mr Ferrier said that in 2013 when LNG 17 was held in Houston, the industry was euphoric as it experienced a steady growth of the gas business, with an exponential number of gas projects and bright prospects for LNG exports from the USA based on the shale gas productions.

“Three years later, following the slump of oil and gas prices in 2014 and 2015, and the slowing down of world economy and energy demand, the picture has dramatically changed,”? he said.

“Nevertheless, natural gas remains the only fossil fuel that has the capacity to complement the development of Renewables. Global production forecasts are expected to improve in 2016 and LNG demand in Asia to continue to grow, but at a slower pace than previously expected.

“The projects that have been already decided and had the Final Investment Decision (FID) taken before 2014 are now on stream. The issue is with new projects that have not yet been launched. Low oil and gas prices may affect the industry’s ability to reinvest and take new FIDs. There will be a fierce competition among projects and at the end of the day a choice will be made taking into account outlets, profitability and capacity of cost savings.”?

Mr Ferrier said the obvious main concern for the LNG industry is that prices could remain depressed for a long period of time, due to low demand.

“But the world energy community and particularly the experts are convinced there is a right price for oil and a right price for gas as well. Reducing both capital and operating costs will be a major challenge for the development of new projects,”? he said.

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