Australia posed to be LNG leader

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SYDNEY, April 11 (UPI) -- Australia could surpass Qatar as the world's largest exporter of liquefied natural gas by the end of the decade, experts say.

Australian oil and gas major Woodside's $15.1 billion Pluto LNG project, scheduled to deliver its first shipment this month, adds a "third leg" to Australia's resources boom which has been fueled by exports of coal and iron ore, the Financial Times reports.

The project will process gas from the Pluto and Xena gas fields in Western Australia, estimated to contain 4.8 trillion cubic feet of dry gas reserves.

Pluto is underpinned by 15-year sales agreements with Japan's Kansai Electric and Tokyo Gas, both of which became project participants in January 2008, each acquiring a 5 percent interest.

Australia now has under construction 70 percent of the world's LNG capacity, capable of supporting 40-50 years of production, says Australia's Bureau of Resources and Energy Economics.

Those projects – seven in total, not counting Pluto – together total $175 billion in committed LNG investment, Australian federal resources and energy minister Martin Ferguson said at last month's Energy State of the Nation Forum in Sydney.

Yet Australia's LNG sector isn't without challenges, including strict regulations and rising project costs. Woodside's Pluto, for example, was originally targeted for production last year and incurred $900 million in additional costs, International Business Times reports.

On Monday, Woodside said it would delay its final investment decision until the middle of 2013 on its proposed $30 billion Browse LNG project in Western Australia.

That project includes three gas fields estimated to contain a combined contingent resource of about 13.3 trillion cubic feet of dry gas and 360 million barrels of concentrate.

Australia also faces increasing LNG competition, particularly from the United States, posed to become a major exporter because of its shale gas reserves.

"From a buyer's perspective, security of supply is critical and foremost in their minds when they are contracting volumes," Craig McMahon, head of Australasia upstream research at Wood Mackenzie was quoted as saying by the Times.

"While Australia may have challenges, it's still OECD production, it's still low political risk and even if projects are a bit late, it is still safe and secure production for the next 20 to 30 years."

Noting that the United States' LNG arena is based on cheap Henry Hub gas – the benchmark U.S. gas price – McMahon says: "that's something a Japanese or South Korean buyer can't control and that makes them feel uncomfortable."

Post Fukushima, Japan is increasingly relying on LNG to replace the nuclear power shortfall, as only one of its 54 commercial nuclear power plants is currently in operation.