Testing times ahead for LNG

AUSTRALIA is in line to dominate the Asia-Pacific region’s supply of liquefied natural gas but the industry will be faced with challenges, according to Deloitte global oil and gas leader Adi Karev.
Testing times ahead for LNG Testing times ahead for LNG Testing times ahead for LNG Testing times ahead for LNG Testing times ahead for LNG

In his address to delegates at the Australian Petroleum Production & Exploration Association conference in Brisbane this morning, Karev said Australia may surpass Indonesia and Malaysia as the world's leading exporter of LNG from 2010 and beyond.

"Australia is well placed to play an important role in the paradigm shift from west to east because of its geographic location and rapidly expanding LNG sector," he said.

However, the positive predictions are likely to be challenged in the years ahead in four areas: access to resources including human capital, demand saturation, supply glut and project cost overruns.

"Securing access to resources necessary to develop Australia's growing LNG industry will not be easy," Karev explained.

"Competition for human capital - engineers, project managers and geologists - will be heightened, and project finance and raw materials will be strained given the competition for other LNG and other large-scale infrastructure projects."

Earlier this year, the WA Chamber of Minerals and Energy forecast Western Australia would need to recruit and deploy around 10,000 extra workers through 2011, rising to 37,000 by 2012, when LNG construction is likely to reach its peak.

"Further, the shortage of skilled labour will likely bid up wages and contractor rates in the sector, further adding to the cost of these already expensive projects."

On the federal government's proposed new taxation regime, Karev said Australia should continue to be the preferred source of many raw materials if the government gets the regulatory settings right and manages the resourcing constraints.

"The global energy industry will no doubt be watching recent developments regarding the proposed new taxation regime with significant interest," he said.

"The government has to work closely with the industry to create certainty as quickly as possible."

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