Australian LNG to grow despite weak prices: RBA

Australian LNG exports are likely to continue to grow despite weak global prices, according to the Reserve Bank of Australia (RBA).

The RBA’s Head of Economic Analysis Department Alexandra Heath, speaking at the Committee for Economic Development of Australia’s (CEDA) New South Wales Energy Series in Sydney, said that Australian LNG production was ramping up following a substantial increase in investment.

Acknowledging that the viability of future projects may be challenged due to the falling LNG price in Asian markets, Ms Heath said this shouldn’t affect production.

“The decline in prices is unlikely to lead to a significant reduction in production from existing producers because the high fixed costs of building the infrastructure have been paid and marginal production costs are relatively low,” said Ms Heath.

“Ultimately, the outlook for LNG demand in Asia will depend on the availability and price of competing sources (including renewable energy), and the extent to which Asia’s natural gas demand translates into demand for LNG (rather than pipeline gas imports or locally produced gas).”

Ms Heath highlighted approximately $230 billion – equivalent to around 14 per cent of one year’s worth of GDP – has been invested in Australia’s capacity to produce LNG.

As a result, Australia has increased in importance as a supplier of energy, and LNG has made a significant contribution to GDP growth.

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