As we have just read, gas, specifically LNG, is the flavour of the day at the moment, and that situation looks like continuing in 2010.
Gorgon dominates discussion, with Wheatstone, Pluto and then the huge Queensland coal seam methane prospects close behind.
But export returns won’t be there, production and exports will rise, but returns will fall because of a combination of factors.
In fact export volumes will rise 13% in the current financial year, according to the Australian Bureau of Agricultural and Resource Economics.
But it said there will there will be a sharp fall, in their value because of sluggish world economies (especially in Japan) and the high value of the Aussie dollar.
So the outlook is more skewed towards the stockmarket, rather than the profit and loss account. Those returns will come slowly, but surely over the next decade.
ABARE said this week it sees Australia’s gas production rising 10% in the current 2010 financial year to 48.5 billion cubic metres.
It said this increase would come from the start-up of new gas fields, including Blacktip (an initial volume of 650 million cubic metres) off the north-west coast of Australia; Henry (300 million cubic metres) and Longtom (670 million cubic metres) off south-east Australia; and Pyrenees (620 million cubic metres) off Western Australia.
"Coal seam methane is also expected to make an important contribution to higher gas production in Australia.
"A number of projects have recently been completed or are due for completion in 2009-10, which could increase production of coal seam methane by 27 per cent.
"These projects include the Spring Gully and Talinga fields, with a combined annual production capacity of 1.2 billion cubic metres, and the Lacerta field (160 million cubic metres) in Queensland."
And while LNG exports are forecast to increase 13% to 17.4 million tonnes in the year to June, the value will tumble.
ABARE said the increase in output will come from a full year of operation at the fifth train of the North West Shelf project (Woodside and Shell).
"Although the global economic downturn has not (to date) affected the volumes of Australia’s LNG exports because the bulk of the exports are under long-term contracts, there has been an adverse effect on the value of exports because of lower prices for LNG cargoes.
"In addition, the higher value of the Australian dollar against the US dollar has reduced the value of shipments in Australian dollar terms.
"As a result, the value of exports in 2009-10 is forecast to decrease by 31 per cent to $7 billion," ABARE predicted.
Adding to the downward pressure on prices is rising overproduction.
The IEA gave the looming "glut" a lot of attention in its recent world outlook.
This week, ABARE added its voice, pointing out that since the start of this year, "44 million tonnes of capacity has been commissioned, including 23.4 million tonnes in Qatar, 9.6 million tonnes in the Russian Federation and 7.6 million tonnes in Indonesia."
"The start-up of these LNG projects is estimated to have resulted in annual world export capacity increasing by 21 per cent to around 250 million tonnes at the end of 2009.
"In 2010, world LNG production capacity is expected to increase by a further 12.1 million tonnes, being underpinned by the addition of a seventh train at Qatar’s RasGas project (7.8 million tonnes) and the start-up of the Pluto project (4.3 million tonnes) in Australia.
"Over the next two years, some of the older LNG production plants could reduce their output in response to an oversupplied market.
"For example, some LNG plants in Brunei, Malaysia, Indonesia, Nigeria and Oman have reduced production to either carry out maintenance or divert natural gas for domestic consumption.
"However, it is unlikely that a reduction in supply from these plants will offset increased production associated with the start-up of new capacity."
Oil production
in Australia is forecast to weaken this year for timing and technical reasons, according to ABARE.
But the value of oil exports will rise slightly and still outweigh income from the boom product, LNG (A message for investors there)
"In 2009-10, Australia’s crude oil and condensate production is forecast to total 27.2 gigalitres, a decline of 2.3 per cent from 2008-09.
"Two new oil fields are scheduled to commence operation in the first quarter of 2010, Pyreness (capacity of 96 000 barrels a day) and Van Gogh (63 000 barrels a day).
"While these fields are large by Australian standards, the effect of their initial output on total Australian production in 2009-10 will be offset by continued maintenance at the Woollybutt field and natural decline from other mature fields.
"The full benefits of production from Pyreness and Van Gogh will be evident beyond 2009-10.
Reflecting lower production in 2009-10, Australia’s crude oil and condensate exports are forecast to decline by 2.4 per cent to 16.2 gigalitres.
"The value of Australia’s crude oil and condensate exports in 2009-10 is forecast to increase by 3.5 per cent to $9.1 billion.
"The effect of higher world oil prices on export earnings is expected to more than offset lower export volumes and an assumed appreciation of the Australian dollar against the US dollar.
"In 2009, world liquefied natural gas (LNG) trade is estimated to increase by 3 per cent to 176 million tonnes.
"This growth in trade re
