Australia's annual investment in LNG is about to drop to just 20% of its peak

Chevron’s LNG jetty in Western Australia. Image: Chevron.

Australia’s investment in liquefied natural gas (LNG) projects is unlikely to exceed $10 billion annually in the future, down from the $50 billion peak reached in 2013, UBS said.

“LNG investment is well and truly past its peak,” UBS analysts, led by Nik Burns, said in an investor note. “We believe future annual investment is unlikely to exceed $10 billion unless Chevron, Shell and/or ConocoPhillips commit to LNG expansion.”

About $A118 billion of LNG developments are scheduled to be completed in 2017 across Australia, including Chevron’s Gorgon, Inpex’s Ichthys and Royal Dutch Shell’s floating vessel, according to Deloitte Access Economics.

A supply glut may spook investment in new Australian LNG projects beyond 2017 with companies questioning the feasibility of planned floating facilities. Planned FLNG projects in Australia, including Woodside’s Browse and Sunrise facilities and Exxon Mobil’s Scarborough, may not proceed due to a more competitive operating environment, Deloitte said.

Chevron signalled in March that it is unlikely to approve an expansion of its Gorgon and Wheatstone export developments as tries to boost returns from investment worth about $88 billion.

The following charts from UBS summarises the forecast Australia LNG Projects and investment.

The slump in LNG investment ties in to the broader theme of declining mining investment as increasing supplies are expected to weigh on prices.

“Mining investment is still expected to fall further over the forecast period, as large resource-related projects are completed and few new projects are expected to commence,” the Reserve Bank of Australia said in its quarterly Statement on Monetary Policy.

“However, the drag on overall domestic activity from falling investment in the resources sector is expected to be limited, as most of the remaining decline is related to
LNG projects.”

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