Boston, MA -- (SBWIRE) -- 04/15/2013 -- Australia is on track to become the world's largest liquefied natural gas (LNG) exporter by the end of our forecast period in 2022, surpassing Qatar as a series of major projects come online. However, the spiralling costs of LNG project will most likely slow the momentum in further expansion of Australia's LNG export capacity. The country will also have to contend with a growing reliance on oil imports as domestic crude oil production declines while refining outlook appears increasingly bleak in face of regional competition.

The main trends and developments we highlight for Australia's oil & gas sector are:

- Our forecast for gas production is 132.4bcm by 2017 from an estimate of 48.9bcm in 2012. This growth will be brought about by the development of gas fields that will come online alongside the completion of LNG projects. We expect about 75% of this gas to be exported as LNG, largely to Asian customers. By 2022, gas production is forecast to hit 164.9bcm. with LNG exports surpassing 100bcm.
- However, expansion of liquefaction capacity - and consequently exports - could be delayed. Spiralling developments costs, owing to a shortage of skilled labour and a strong Australian dollar, together with an expected loosening of the global LNG market as more supplies come online, could worsen the economics of LNG projects in Australia.
- According to the country's energy ministry, Australia is using oil three times faster than it is finding it. We estimate that oil production and consumption was 526,000 barrels per day (b/d) and 1.03mn b/d, respectively, in 2012. Consumption is expected to continue its uptrend to hit 1.08mn b/d in 2017 and 1.12mn b/d in 2022. Oil production, however, is projected to trend downwards to 518,600b/d in 2017 and 506,700b/d in 2022 due to the lack of notable projects beyond 2013.
- Nonetheless, further oil discoveries and possible development particularly in the Cooper Basin, and production from liquid-rich shale pending further exploration could pose upside risks to our oil production forecasts.
- The refining environment remains weak in Australia. Shell's 79,000b/d Clyde refinery in Sydney will close in September 2012, while Caltex announced that it will shut down the Kurnell refinery - Australia's second largest with a capacity of 124,500b/d and also located in Sydney - in the second half of 2014. Shell's Geelong refinery could suffer the same fate. The age, small size and relatively low complexity of the country's refineries has rendered them uncompetitive against regional counterparts.

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