Oct 15 2018
The Australian Liquefied Natural Gas Production industry has grown significantly over the past five years, due to strong investments in LNG projects and export demand. While output will continue to rise, industry revenue is expected to stagnate due to global oversupply and external competition.
“Lower export prices have particularly affected establishments in Queensland, which rely on more expensive coal seam gas extraction”, says IBISWorld Industry Analyst Jason Aravanis.
The 10 LNG facilities operational in the current year together have an annual nameplate capacity of 87.6 million tonnes per year. Seven firms operate these 10 establishments, including Chevron, Woodside and Shell. The Prelude and Ichthys projects, both expected to begin operating by March 2019, are expected to boost industry revenue by 39.3% in 2018-19. However, this wave of project development is expected to conclude in 2018-19.
IBISWorld estimates that LNG production revenue will increase by an annualised 0.2% over the next five years to reach $43.9 billion. Global demand for LNG will continue to increase in the long-term, as developed economies transition towards renewable energy. Natural gas is seen as an ideal substitute for use with intermittent renewable generation, as it can be quickly dispatched, is easily transported, and emits less than half of the emissions of coal-based power.
Higher export prices and greater awareness of environmental issues are expected to drive demand for LNG over the next five years. Increasing export prices positively affect the industry by increasing revenue. Furthermore, shifting consumer consciousness towards environmentally friendly fossil fuels and away from coal has driven demand for LNG. This trend is expected to continue in 2018-19, offering a window of opportunity for Australian firms.
Increased foreign production of LNG and other more environmentally friendly fuel sources are forecast to increase competition for Australian firms. Although natural gas remains competitive against other fuel sources due to it being environmentally friendly relative to coal, the need to transition to renewable energy represents a direct threat to fossil fuel production, including natural gas, over the long term.
Industries mentioned in this report: