While the various gas projects in Australia are facing escalating costs, at least many are well ahead of rival developments elsewhere in the world for hitting production in what MPW says is the "key 2014-16 market window".

Yet MPW believes Australia has had its day in the sun.

"Since September 2009, Australian operators have now sanctioned a massive 61mtpa of greenfield LNG capacity (equivalent to 25% of current global demand)," MPW said in its Australian Energy Sector report.

"Although good while it lasted, this flood of project approvals was clearly unsustainable and we believe Ichthys could well turn out to be the last local greenfield LNG project sanctioned.

"Indeed with rampant cost inflation in the face of an increasingly price-sensitive customer base, these large-scale, expensive projects simply look cumbersome and out-dated in the context of intensifying global competition meaning local projects are being priced out of the market."

MPW said there are 14 LNG trains under construction in Australia and Australian LNG export revenues could surpass iron ore by 2018. It estimated around $30 billion will be spent on current LNG developments this year with about $8 billion coming from ASX-listed players.

Consequently, MPW does not expect the likes of Woodside, Santos, Oil Search or Origin Energy - its outperform-rated, large-cap energy stocks - to sanction further LNG projects this year.

LNG demand

The Fukushima disaster in Japan and associated nuclear energy cutbacks, along with Arab Spring-related pipeline disruptions helped push up LNG demand by almost 9% last year, MPW said.

"This was the third consecutive year of above-trend growth with global demand now up over 40% since the financial crisis in 2008."

For 2012 MPW forecasts global LNG demand growth of 20 million tonnes per annum compared to an additional 14Mtpa on the supply side of the equation. Its analysts therefore expect the roughly 20Mtpa global surplus of LNG in 2011 will be eroded and LNG shortages could arise by the end of 2013.

But there is no shortage of unexploited gas fields in the world and MPW foresees a deteriorating LNG market over the longer term.

"While it was Fukushima-induced demand growth that got all the headlines last year, perhaps the most lasting impact from 2011 will turn out to be the unprecedented number of LNG project proposals announced during the year targeting the longer-term market.

"Specifically, we count over 120mtpa of newly proposed capacity in 2011, principally from North America and East Africa but with contributions also from Russia, Iraq, Israel and West Africa. While many of these proposals remain highly speculative, it nevertheless gives buyers more choice and an improved negotiating position."

Then there is the ominous possibility that LNG powerhouse Qatar will seriously respond to competition.

"Given Qatar's advantaged position on the cost curve, this is a potential concern for all would-be suppliers and we expect several long-term deals to be struck with Asian customers enabling Qatar to send more gas east."

Another possible threat to longer term LNG demand is a shift back to nuclear energy in Japan.

"While Japan's LNG demand rose [around] 14% in the 6 months from April last year, the cost of these LNG imports rose by over 40%. We believe this energy cost inflation will provide policy makers with a strong incentive to re-start the country's idle nuclear plants," MPW said.

The investment bank also believes China's gas demand is "well covered" until the end of this decade and by then it could focus on its vast shale gas resources.

Blackout-prone India was not even perceived as a strong market in the long term due to a "growing taste" for US LNG exports and recent gas discoveries closer to home in East Africa.

The shale gas threat

Shale gas euphoria is not just found at the Cooper Basin but also around the world.

The US Energy Information Administration has estimated Australia has just 6% of the world's recoverable shale gas resources. MPW said much of the remaining 94% was in LNG-importing countries such as China, India and Argentina.

"These countries are also pursuing this potential and the US example demonstrates the devastating effect local shale gas production can have on a country's forecast LNG demand.

"As a result, once the local geology has been de-risked and the current construction boom in Australia has subsided, anticipated LNG demand may simply not be there for shale gas producers by the time they could realistically consider exporting."

Without considering some of the geological uncertainty of shale gas opportunities in the Cooper Basin, MPW said the sheer scale of these apparent resources will make them difficult to commercialise.

"Indeed, we note that the estimated recoverable shale resources of Beach [Petroleum], Drillsearch [Energy] and Senex [Energy] would be sufficient to meet eastcoast gas demand for between 150-200 years suggesting operators must have an eye on export markets."

Ignoring its estimated "250 trillion cubic feet of CSG resource sitting ahead of shale in the

development queue", MPW said the three sanctioned CSG-to-LNG projects in Australia would require less than 25% of the Cooper's shale gas over their 20-year lives.

"What's more, with Australia already running at capacity, no more LNG projects can realistically be considered in the medium term.

"As far as the would-be shale gas producers are concerned, it appears the domestic market is simply too small while the export market is inaccessible."

Possible LNG game changers

Outside of a potential late 2008-scale global economic downturn this year, 2012 could host other market-shaping events this year.

MPW said any Iranian interference with traffic in the Strait of Hormuz would hurt the LNG trade more than oil markets.

"This would cut off all of Qatar and Abu Dhabi's supply which accounts for over 30% of global [LNG] supplies while only [around] 15% of global oil supply would be affected."

The possible use of LNG as bunker fuel for ships in response to carbon emissions policies would improve demand, while there are other favourable plans to roll out hundreds of LNG fuel stations for vehicles in the US.

Yet MPW expects changes in the transportation fuel mix will happen slowly and noted that British Petroleum's recent forecasts expect natural gas use in transport to reach just 2% of global demand by 2030.