While the global LNG market is in oversupply, experts predict a shortage to re-emerge in the first half of the next decade, driven by strong gas demand growth from the likes of India and China.
“Given construction timescales, new LNG FIDs, such as investment in backfilling existing facilities with new sources of gas, need to be taken now,” said Ms Cullinane.
“For Australia to actively participate in the next generation of supply, something needs to happen to make the underlying project economics more attractive for developers and investors.”
According to Cullinane there are many solutions to improving Australia’s competitiveness, including:
- A need for greater collaboration – including sharing infrastructure, leveraging expertise and managing labour bottlenecks. For LNG projects to succeed, it’s critical to have operator focus and partner alignment
- Asset optimisation – focus needs to be on improving project economics via asset optimisation, productivity, efficiency and continuous improvement to sustainably reduce cost
- Lower cost project design – innovative project designs such as the modular project approach, with a staged development strategy, enables developers to reduce production costs, assembly timelines and risks, while raising production quality
- Smaller scale developments – small scale FLNG projects are cheaper to build than a land-based LNG facility with significantly shorter development timescales, allowing developers to access customer markets more quickly
- More flexible, agile operating models – operators need to have a divertible supply portfolio, a flexible shipping fleet and a global marketing team. Perhaps Australian LNG should follow the more flexible US LNG operating model of tolling and fixed liquefaction fees
- Adopting a customer-oriented approach – ability and willingness of LNG producers to offer flexibility is a critical success factor in securing future contracts
- Leveraging the power of digital – digital has a big role to play in asset performance management, helping LNG producers get more value from their assets and operate more efficiently
- Addressing the role of governments – stable, transparent regulatory regimes that minimise red tape, give producers freedom of movement and investors long-term clarity whilst avoiding interfering in the market too much are crucial.