Thursday, October 20, 2011

Australia Energy Report

Australia has considerable petroleum, natural gas and coal reserves and is one of the few countries belonging to the Organization for Economic Cooperation and Development (OECD) that is a significant net hydrocarbon exporter, exporting about two-thirds of its total energy production. Australia was the world’s largest coal exporter and the fourth largest exporter of liquefied natural gas (LNG) in 2009, after Qatar, Malaysia, and Indonesia. Australia’s prospects for expanding these energy exports in the future are promising as Asian demand for both coal and LNG is rising along with Australia's proven natural gas reserves. While Australia also exports crude oil and refined petroleum products, it is a net importer of oil. Hydrocarbon exports accounted for 19 percent of total export revenues in 2009.




Australia's stable political environment, substantial hydrocarbon reserves, and proximity to Asian markets make it an attractive place for foreign investment.



Oil


According to The Oil and Gas Journal(OGJ), Australia had 3.3 billion barrels of proven oil reserves as of January 1, 2010, more than double the 2009 OGJ estimate of 1.5 billion barrels. Increases in reserve estimates are reportedly based on additional oil liquids reserves, mainly natural gas liquids and other liquids, discovered through the ongoing drilling taking place in already producing oil and natural gas basins. The majority of these reserves are located off the coasts of Western Australia, Victoria, and the Northern Territory.

Australia Oil Production and Consumption 1990 2010


Sector Organization


Australia’s management of oil exploration and production is divided between the state and Commonwealth (Federal) governments. Australia’s state governments manage the applications for onshore exploration and production projects, while the Commonwealth Government shares jurisdiction over Australia’s offshore projects with the government of the adjacent state or Territory. The Ministry of Industry, Tourism and Resources (MITR) and the Ministerial Council of Energy (MCE) both function as regulatory bodies over Australia’s oil sector. In place of a national oil company, the Australian government supports privately held Australian companies, of which the largest are Woodside Petroleum and Santos. ExxonMobil is the largest foreign oil producer; other international oil companies include Shell, Chevron, ConocoPhillips, Japex, Total, BHP Billiton, and Apache.


Production


In 2009, oil production totaled 589,000 barrels per day (bbl/d), of which 81 percent (476,000 bbl/d) was crude oil. Oil production in Australia peaked in 2000 at 828,000 bbl/d and has since been declining. According to the Australian Petroleum Production and Exploration Association (APPEA), a continued decline in oil liquids production is expected over the next decade.



Australia’s main frontier for exploration has moved in recent years to the deepwater area of the Timor Sea, although the nearby Carnarvon Basin off the coast of Western Australia remains the busiest area in terms of overall drilling activity. After a spike in drilling activity in the past decade, several major discoveries are now in the process of being put into commercial operation.

 
The Pyrenees and Van Gogh projects offshore Western Australia came online in the first quarter of 2010 and are expected to make a significant contribution to oil production. Pyrenees has a production capacity of 96,000 bbl/d and Van Gogh has a production capacity of 150,000 bbl/d. In fiscal year 2010-2011, these projects are expected by the Australian Bureau of Agricultural and Resource Economics (ABARE) to increase oil exports by 7 percent in line with higher production, aided by the Kipper and Turum fields starting up in the beginning of 2011 at 10,000 and 11,000 bbl/d, respectively. These additions to production are expected to offset the fall in output in other fields at least in the short term.


In 2010, 31 new exploration areas in 5 offshore basins were offered for bidding, with closing dates either November 2010 or May 2011, depending on the exploration status and data available in these areas.


Pipelines


Australia has a well-developed domestic oil and gas pipeline network. The Australian Pipeline Trust, with 6,200 miles of pipeline, is the largest operator. Epic Energy is the second largest, with 2,500 miles of pipeline. Santos operates two major domestic pipelines that are used for carrying oil and oil products, which include the Jackson to Brisbane line that spans 500 miles, and the Mereenie to Alice Springsline that covers 167 miles. Esso Australia Ltd. operates the 115-mile Longford to Long Island Point pipeline.


Imports and Exports


In 2009, according to EIA estimates, Australia had net oil imports of about 360,000 bbl/d, close to 40 percent of its domestic consumption of 946,000 bbl/d. The high proportion of imports as a share of total oil production reflects the location of the majority of Australia's oil production off its northwest coast, which is closer to Asian refineries than to Australia's domestic refineries, located on its east coast. Conversely, the majority of Australia's refinery capacity is located close to its major domestic consuming markets on the east coast.Australia's crude oil and condensate imports mainly come from South East Asia; Viet Nam is currently the largest source, while Singaporeis the largest source for Australia's refined product imports.



According to EIA estimates, in 2008, Australia had gross exports of 249,000 bbl/d of crude oil, about 42 percent of its total oil production, going to Asian markets, mainly South Korea, Singapore, and Taiwan. Australia's 2008 gross exports of petroleum products were 62,800 bbl/d, about 11 percent of its total oil production; its largest markets were New Zealand and Singapore.


Refining


According to The Oil and Gas Journal, in January 2010, Australia had 7 major refineries, with a total crude oil refining capacity of 725,000 bbl/d, up from 696,000 bbl/d in 2008. Crude oil feedstock for these refineries primarily comes from oil produced in the Bass Strait offshore southeastern Australia as well as imports.


Natural Gas


According to The Oil and Gas Journal (OGJ),Australia had 110 trillion cubic feet (Tcf) of proven natural gas reserves as of January 2010, triple OGJ's 2009 reserves estimate of 30 Tcf. The upgrade is largely a result of increased exploration and development of its unconventional as well as conventional gas sources. It has been reported that unconventional gas deposits, i.e., coal seam and shale gas deposits, have become an increasingly larger component of gas reserves due to technological advances. Australia was the twelfth largest holder of natural gas reserves in the world in January 2010. However, significant new discoveries have been announced as recently as July and August 2010.


Sector Organization


The Australian government has no ownership stake in the domestic natural gas industry. The industry is regulated by the Ministry of Industry, Tourism and Resources (MITR) and the Ministerial Council of Energy (MCE). The Australian government created the MCE in 2001 in order to build policy coordination between the Commonwealth Government and the state governments. The MCE functions as the director of natural gas policy. Major domestic and foreign players operating in Australia include Santos, Woodside, Chevron, ConocoPhillips, ExxonMobil, Origin Energy, BG Group, Apache, INPEX, Total, and Shell.


Production


Natural gas production in Australia reached 1.5 Tcf in 2009 and is on a rising trend, with significant new projects coming onstream in the short to medium term. Queensland and New South Wales are the main sources for coal seam gas (CSG), which accounted for 13 percent of gas production in 2009, while conventional gas is largely located in the Carnarvon Basin offshore North Western Australia. Much of Australia's natural gas production is converted into LNG for export as well as for domestic consumption. A number of major new LNG projects are under construction or planning as the Asian LNG market continues to expand; 4 projects will use conventional gas from offshore the northwest coast and 4 will be based on LNG extraction from CSG in Queensland.

Australia Natural Gas Production consumption 1990 2010






Conventional new LNG production projects include:



The Pluto project is under construction near Karratha offshore Western Australia. Woodside Energy owns 90 percent of the venture supported by 15-year contracts with Kansai Electric and Tokyo Gas at 5 percent equity each. The project includes an offshore platform connecting 5 subsea wells and a 112-mile pipeline to an onshore LNG facility on the Burrup Peninsula. The first train is expected to come online in March 2011 with estimated new capacity of 200 billion cubic feet (Bcf) of LNG per year.


The Gorgon project, led by Chevron (50%), with Shell and ExxonMobil (25% each), is currently under construction. The Gorgon gas field, which is 80-124 miles off the northwest coast, is believed to contain 40 Tcf of natural gas and is currently Australia's largest known natural gas resource. The project includes development of the Gorgon gas fields with subsea pipelines to Barrow Island; a gas processing facility on the island with production capacity of 700 bcf per year, consisting initially of three, 234 Bcf per year LNG trains; LNG shipping facilities to transport products to international markets; and greenhouse gas management via injection of carbon dioxide into deep formations beneath Barrow Island. It was reported that both the Western Australia Environmental Protection Authority and the Australian Environmental Ministry approved the project in August 2009. A final Investment Decision was made on September 14, 2009 and the project is expected to be completed in 2014.


The Icthys project, still in the planning stages, is led by Japan's INPEX (74%) and Total (26%), is also located offshore the northwest coast in the Browse Basin. It is expected to produce LNG, LPG, and condensate for export to Japan and elsewhere via a 528-mile undersea pipeline connecting the fields to a new export LNG terminal to be built near Darwin. When the project comes onstream in 2016 its production is expected to be at least 377 Bcf per year.


The Wheatstone project, still in the planning stages, is led by Chevron (75%) and Apache (25 %) and is supported by LNG contracts with Tepco and Kogas. When complete, its LNG export plant's capacity will reportedly be 1,177 Bcf per year and there will be a smaller plant for domestic production. Final investment decision is due in 2011, but the project has already attracted third party gas as local subsidiaries of Apache and KUFPEC have signed deals to join the project as gas suppliers from their nearby Julimar and Brunello fields and 25 percent equity participants, which will extend the life of the project.


Unconventional new LNG production projects still in the planning stages include:


The Gladstone project will be the world's first major CSG to LNG operation. Located onshore Queensland, this project is currently a joint venture between Santos (60%) and Petronas (40%), although discussions with Shell to take a one-third equity share are reportedly ongoing. The project received environmental approval from the Queensland government in May 2010. Gladstone LNG has plans for 2 plants with capacity of 175 Bcf each. Sinopec and Korea Gas Corp. are expected to buy small stakes in the project.


Arrow CSG to LNG project is another Queensland-based venture in the planning stages. A joint venture between Shell and PetroChina is reportedly in the process of acquiring Arrow. The Arrow project involves building up to 4 LNG processing plants, each with a capacity of 195 Bcf per year. A recent statement by Santos about collaboration between projects has fueled speculation that a deal between Santosand Shell could be followed by a merger of Gladstone and rival Arrow to save on infrastructure and equipment costs.




Analysts expect a merger may also occur between 2 other rival projects in Queensland: one is the Australia Pacific project, a 50-50 joint venture between Origin and ConocoPhillips, and the other is the Queensland Curtis project being developed by BG Group and China's CNOOC.


LNG Exports


The distances between Australia and its key natural gas export markets in Asia discourage any pipeline trade; all exports are in the form of LNG. Over the past decade, Australian LNG exports have increased by 48 percent and they are expected to continue to increase over the short to medium term. According to Cedigaz, in 2009, Australia exported 856 Bcf of LNG, up from the 755 Bcf reported by EIA in 2008. Japan is the primary destination, but other purchasers include China, South Korea, India, and Taiwan.

Australia Lng Export




Australia currently has 2 LNG export facilities. The largest is the North West Shelf Venture (NWSV), a consortium of 6 energy companies (Woodside, Shell, BP, Chevron, Japan Australia LNG, BHP Billiton), which operates 5 offshore LNG trains with a total capacity of 761 Bcf per year. It relies on natural gas supplied from nearby fields in the Northwest Shelf (NWS). The majority of LNG produced by the NWSV is exported to Japan by long-term contracts. Darwin LNG is the second facility, a consortium of ConocoPhillips, Santos, Eni, SPA, and INPEX. It has 1 production train with a total capacity of 140 Bcf per year and exports LNG under contracts to Tokyo Gas Corp. and Tokyo Electric. Darwin is located on Australia’s northern coast and is supplied with natural gas from fields in the Timor Sea. However, as the new LNG facilities come online beginning with the Pluto project, Australia's LNG export capacity will be expanding substantially.




Coal


As of the beginning of 2009, Australia contained 76 billion short tons (Bst) of recoverable coal reserves. Australia is the world's fourth largest coal producer, after China, the United States, and India, but it is the largest exporter.


Sector Organization


Australia has around 107 privately owned coal mines located throughout the country. About 74 percent of Australia's coal production comes from open pit operations, with the remainder coming from underground mines. International companies such as BHP Billiton, Anglo American (UK), Rio Tinto (Australia-UK), and Xstrata (Switzerland) play a significant role in Australia's coal industry.


Production


In 2009, Australia produced 450 million short tons (MMst) of coal. Over the last 2 decades, coal production in Australia has grown by 34 percent, with new projects continuing to come online every year. The states of Queensland and New South Wales (NSW) together account for 97 percent of Australia's black coal production. Black coal production has been increasing by an average of 3.2 percent per year between fiscal years 2003-04 and 2008-09, supported by the addition of new capacity, and is expected to continue to increase over the medium term. Australia also has brown coal deposits in South and Western Australia, Victoria, and Tasmania, where it is used for domestic electricity generation.

Australia Coal Production Consumption 1990 2010


Exports


Australia exported about 66 percent of its coal production in 2009, or about 300 MMst, accounting for 28 percent of global coal exports. According to the Australian Coal Association, Japan was the destination for over 40 percent of Australia’s coal exports during Australian fiscal year 2008-2009. Other important export markets included South Korea (15%), Taiwan (10%), and India and China (9.5% each). About 8 percent of Australia's coal exports went to Europe.




The export coal industry is serviced by 9 coal loading terminals located in Queensland and NSW. These terminals in June 2009 had handling capacity of 364 cubic feet per year. Several new port infrastructure projects are in various stages of development and are expected to add about 130 million short tons to annual coal export capacity by 2014.








1 comment:

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