BHP Billiton is backing the US gas boom to continue and says exports from there could start within three years, which could be bad news for Australia’s rival projects.
The onshore shale projects BHP controversially paid $US20 billion for in 2012 will be profitable or “self-funding” by 2016, the company’s head of petroleum and potash Tim Cutt said.
Advances in drilling and hydraulic fracturing have allowed massive volumes of shale oil and gas deep below the earth to be economically produced in the US.
The extra supplies have led to US government approval for limited exports of liquefied natural gas (LNG) for the first time, with BHP predicting the country would supply 11 per cent of Asian demand by 2030.
“LNG should start going offshore during the next five years and that will have some impact on the gas price,” Mr Cutt told reporters during a US investor briefing.
“We think this will happen, we hope the US government will be supportive of this happening because it will underpin a solidification of the gas price in North America.”
While US exports would push up the domestic gas price there, it would push down the price of global exports, potentially threatening the viability of more than $200 billion worth of northern Australian LNG projects.
LNG is tipped to eventually replace iron ore as Australia’s top earning export.
Finance group Credit Suisse’s head of oil and gas David Hewitt is predicting the extra supply will lead to a fall in the Asian gas from $US15 per million british thermal units (MMBTU) to $US12-$US13, between now and 2020.
While Australian LNG projects either operating or being built have struck sales contracts, proposed new projects might not go ahead, he said.
Final committments are yet to be made for Shell and PetroChina’s Queensland Curtis, Woodside’s Browse and ExxonMobil’s Scarborough projects.
“We do see some price softening as result of the new supply source of US,” Mr Hewitt said.
“Australia has sold everything it is developing … I don’t think there will be any new project sanctions in 2014, I am somewhat pessimistic as to how much more it will develop in the near term.”
However movements away from coal as an energy source augur well for gas and ultimately renewables, said IG market strategist Evan Lucas.
“I am positive about it (Australian gas) … the US shale gas in a short term view will cause volatility but in the longer term gas will become the next thing in terms of a core energy source,” he said.
Mr Cutt said he expected US shale to be a major free cashflow provider generating almost $US3 billion a year by the end of this decade.
However BHP would still be investing $US4 billion a year into the business until 2020.
