WA LNG production up, but sales fail to boost value

Chevron's Gorgon LNG project is one of  $171 billion worth of WA resource projects under construction.

Chevron's Gorgon LNG project is one of $171 billion worth of WA resource projects under construction.

LNG is Western Australia’s most valuable petroleum resource, according to new government data released today.

Data from the Department of Mines and Petroleum (DMP) states the industry is worth $99.5 billion in 2014/15, down 19 per cent from the 2013/14 record total of $122 billion.

The DMP figures showed iron ore remained the state’s highest value commodity with $54 billion in sales.

WA’s petroleum sector was valued overall at $24 billion, down nine per cent on the previous year.

LNG surfaced as WA’s most valuable petroleum product in 2014–15 with output increasing to 20.4 million tonnes. But the production increase was not backed up by sales, which fell four per cent from last financial year to $13.8 billion.

Similar stories were seen in crude oil and condensate.

Production of crude oil rose by seven per cent to 49 million barrels, however sales fell 22 per cent to $4.5 billion. Condensate sales decreased by 14 per cent while output rose to 42 million barrels.

According to the DMP, domestic sales of natural gas were the only petroleum sector to see both a rise in sales and production, increasing by seven per cent and one per cent respectively.

LPG output fell nine per cent and sales fell 29 per cent during the 2014/15 financial year.

While the weaker Australian dollar and increased production rates both helped to partly offset the impact of declining commodity prices, the government said the low oil price proved to be too big of a burden.

“Traditionally perceived as a commodity currency, the Australian dollar decreased in line with falling commodity prices and therefore shielded producers to some extent from lower prices,” the DMP stated.

DMP general manager of policy and coordination Richard Borozdin said the cyclical nature of commodity markets and prices means the value of the industry will always fluctuate.

He added that despite the value decline, investment in resources projects remains healthy, with about $171 billion worth of projects under construction or in the committed stage and another $110 billion planned.

But investment dollars are due to contract significantly within the next 18 months, he warned.

“But what this means is that as construction and expansion of these projects is completed, their contribution to the State’s economy becomes driven by their production capacity, rather than their capital expenditure,” he said.

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