Boston, MA -- (SBWIRE) -- 08/03/2012 -- BMI View: Australia is on track to become the world's largest liquefied natural gas (LNG) exporter in the latter half of the current decade, surpassing Qatar as a series of major projects enter service. However, there are question marks over the costs of Australian LNG relative to other suppliers. The boom in construction of LNG export capacity should drive investment over the coming years, with as much as US$200bn to be spent on up to 18 new schemes or project expansion projects. While gas exports are set to rise rapidly, Australia will also have to contend with a growing reliance on oil imports as domestic production declines.

The main trends and developments we highlight for Australia's Oil and Gas sector are:

- Coal bed methane (CBM) will increasingly contribute to the country's gas output, particularly in the east of the country, where CBM output will feed a number of LNG export terminals that are now under development. We expect overall gas production to hit 100bn cubic metres (bcm) by 2016, freeing up almost 62bcm of gas for export in the form of LNG, largely to Asian customers. By 2021, gas production should be around 130bcm, with LNG exports surpassing 85bcm. There are signs that some operators may delay expansion of their schemes either because of a weaker demand outlook or due to cost considerations.
- In July 2010, the Government announced a decision to extend the coverage of petroleum resource rent tax (PRRT) to cover all onshore oil and gas production and existing offshore production not currently covered by the PRRT. The new provisions were passed by Parliament in March 2012 and will apply from 1 July 2012. Existing royalties and production excise will continue to apply from these areas, but will be creditable against future PRRT liabilities from each individual project.
- Australia's Senate narrowly passed historic climate change legislation - to create the world's second largest carbon trading scheme outside of the European Union - in November 2011. The scheme will come into effect on July 1 2012 at a price of AUD23 (US$23.74) per tonne of carbon. The price will rise by around 2.5% in real terms in each of the next two years. From 2015 onwards, the price will be determined by the market, though a price ceiling and floor will be put in place.
- According to the country's energy ministry, Australia is using oil three times faster than it is finding it. Oil import dependency is expected to increase to 78% within the next 10 years. Government forecasts suggest petroleum import dependency rose to 50% in 2010. BMI is assuming oil and gas liquids production averaging no more than 535,000b/d at its new peak in 2013, before declining to 505,000b/d by 2016 and to 386,000b/d by 2021.

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