Industry Focus

NATURAL RESOURCES A hydrocarbon future As Australia's natural resources industry moves from capital expenditure to operational expenditure, the hydrocarbon industry stands to benefit from a new phase of development WORDS: HOWARD WOOLCOTT Australia has experienced a shift in production of its hydrocarbons from oil to gas since oil production peaked in 2000. Gas production volumes are forecast to show consistent growth to 2020 as demand for LNG exports increases, by which time the economic contribution of the oil and gas industry should account for 3.5 per cent of the national economy. In dollar terms, the oil and gas extraction industry (including exploration and additional services) was worth $28.3 billion in 2011 and is projected to reach $66 billion by 2020, $9.8 billion of which will be added by supply industries. 10 Industry Focus Factors such as continued product demand and improved recovery technology may push peak production to 2035 and beyond. At present, approximately two-thirds of total world LNG liquefaction capacity currently under construction is located in Australia and by 2017 Australia is expected to overtake Qatar to become the largest exporter of LNG in the world. Underpinning the industry has been a long run of capital expenditure (the capex phase) on projects located mainly in Northern Australia. As these facilities become operational, the industry will witness significant opex spending. Australia has three operational LNG plants and a further seven under construction. The current capex-intensive phase will reduce as facilities come online towards 2017. Continued investment in the Australian LNG sector faces increased international competition that may threaten further investment in greenfield LNG projects over the next few years, but brownfield project extensions would be more likely to proceed, ensuring project-related opportunities continue beyond 2017. Every new facility effectively builds on the volume of operational infrastructure

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