SYDNEY, July 23 (UPI) -- An Australian oil and natural gas industry supporter warned that without policy reforms billions of dollars in new liquefied natural gas projects would be at risk.
Issues that need to be addressed include Australia's relatively high taxes, productivity and red and green tape, David Byers, chief of the Australian Petroleum Production and Exploration Association told Australian Mining magazine.
"Policymakers have failed to create a stable, predictable and competitive taxation regime," Byers said. "Regulatory processes for approving projects are becoming increasingly inefficient. And there are serious weaknesses in the development of a skilled workforce and support industries' supply capacity."
LNG projects worth around $200 billion are being built in Australia and there's a potential to invest another $100 billion in projects, Byers said, noting that the sector created 100,000 jobs last year "and is looking to generate this many again in the decade ahead."
But under the current circumstances, Byers warned, "the next generation of Australian LNG projects may never be built."
Costs associated with delivering Australian LNG into key markets are "substantially higher than for projects in East Africa or North America," he said.
At Chevron's Western Australia Gorgon site, which holds an estimated 50 trillion cubic feet of natural gas, cost estimates have increased $9 billion -- more than 20 percent -- to $52 billion because of rising labor costs, harsh weather and logistics challenges at the Barrow Island nature reserve, The Wall Street Journal reports. Furthermore, rising costs may jeopardize a planned expansion of the project.
Analysts say that Australian gas export prices may need to fall as much as 25 percent to compete with U.S. prices, says the report.
"The focus is on the U.S. now. The first (export) projects are under way (in the U.S.), and we expect more to come through," the Journal quoted Andrew McManus, a consultant at Wood Mackenzie in the United Kingdom, as saying.
The firm is forecasting around 50 million tons of annual LNG exports from the United States by 2020, which is equivalent to more than half of Australia's projected supply of exports in that year.
"Everything in Australia's been built. It doesn't look good for new projects," Noelle Leonard, a consultant at FACTS Global Energy, told the Journal. "We don't see any developments taking a final investment decision for at least a year or more. And if they do, the natural progression will be toward expanding existing facilities."