Australia ‘To Be An Energy Superpower’ By Mid 2017
Morgan Stanley report predicts that gas exports will help country eliminate its current account deficit for the first time in four decades
Australia is to become a global gas superpower by the middle of the decade and eliminate its current account deficit for the first time in almost 40 years, according to Morgan Stanley.
“Liquefied natural gas (LNG) exports from Australia could be the next big thing,” said the bank in a new report.
It predicted a “huge ramp-up” in LNG output that could transform the country’s economy, claiming that Australia could overtake Qatar by to become the world’s biggest exporter of LNG as soon as 2017 rather that 2030 as widely assumed.
By then Australia would be a major force in global energy production, with LNG and coal exports together matching the country’s vast iron ore shipments.
Two-thirds of the world’s entire increase in traded LNG capacity is currently from Australia. While the US has a glut of natural gas from shale sources, it will be five to 10 years before it has the export terminals and infrastructure to sell large amounts on the global market.
This gives Australia a window of opportunity. It can benefit from the shortage of LNG supplies in Asia, especially in Japan where closure of nuclear reactors after the Fukushima disaster has left the country heavily dependent on gas imports. Gas is selling in Japan at almost $19 per British thermal units (BTU), compared to just $4.3 in the US.
Once dismissed as a pipe-dream, LNG has come of age with new technology since the 1990s. The breakthrough came with gas turbine technology and advances making it cheaper and safer to transport the fuel in refrigerated hulls made of molybdenum alloy at minus 116 degrees.
“The ramp-up would be enough to see Australia record a current account surplus in 2015, the first since the second quarter of 1975. It is difficult to overestimate the long-term structural importance of this industry to Australia,” said the bank’s East Asia expert Geoffrey Kendrick.
Whether it will be that easy for Australia to boost output is a disputed subject. Chevron says the cost of its Gorgon LNG project on Barrow Island with Shell and ExxonMobil off Western Australia has jumped $37bn to $54bn. It is the latest in a string of setbacks for the LNG sector.
If Morgan Stanley is right, the export share of Australia’s economy will rise from 20pc to 22pc of GDP by 2016. Energy would jump from 10pc to 18pc of total shipments. The return to surplus would be a remarkable shift for a country that has run a current account deficit averaging 4pc of GDP for the last three decades, and is currently near 5pc.