Australia faces a hiatus in new liquefied natural gas (LNG) projects as buyers switch their focus to the United States.
Consulting group Wood Mackenzie says opportunities for new Australian LNG projects will be limited and that high costs need to be controlled for projects to be competitive.
“The US offers customers potentially lower-cost, more flexible LNG and the opportunity to diversify supply portfolios,” Wood MacKenzie said in a statement.
But any new Australian capacity was likely to be smaller than the large new developments and limited to the expansion of existing facilities or floating liquefied natural gas (FLNG), the consulting group said.
Wood MacKenzie head of Australia Upstream Andrew McManus said the five key issues driving buyer motivations were supply portfolio diversification, exposure to Henry Hub pricing (a distribution hub on the natural gas pipeline in Louisiana USA), greater flexibility in contract terms, projects that can be sanctioned quickly, and access to upstream equity.
“For these reasons, US supply has become the most favourable near-term option, that is for deals where supply is expected to start pre 2020,” Mr McManus said.
While Australia would go from contributing seven per cent of global LNG supply in 2000 to an expected 25 per cent by 2018, major Australian LNG customers such as China and Japan could diversify their supply options, he said.
Local projects approaching a final investment decision needed to be aware of what buyers wanted and be ready to respond if other regions faltered.