Changing status of the Australian oil and gas Industry

Nov 3, 2014

Australia has seen an unparalleled ramp up of investment in resources and energy in recent years and as the value of projects under construction and the annual capital expenditure of the oil and gas sector continues to grow rapidly, some have suggested that the Australian oil and gas “boom” may have reached its peak and is about to begin a rapid slide.

But recent reports suggest that may be way off the mark and that Australia still remains one of the world’s leading oil and gas investment destinations, and should do so for some time to come.

For example, a new study by business information specialists IBISWorld has identified the petroleum industry as a sector that is set to rise amongst a list of Australian industries that are set to sink or soar.

According to general manager of IBISWorld, Daniel Ruthven, data suggests that the demand for products located by the petroleum exploration industry is expected to increase in line with rising demand for gas and new technologies for extraction. Due to that demand, IBISWorld expects that industry revenue will increase by a healthy 8.2% over the next year to reach $4.6 billion.

Mr Ruthven went onto say, “As environmental concerns intensify and the world’s emerging economies remain hungry for energy, demand for gas is growing. The industry is pursuing increasingly challenging strategies, including deep-water exploration.”

IBISWorld’s assessment is supported by a Federal Bureau of Resources and Energy Economics’(BREE) report on Australian resource project investment.

In BREE’s latest Resources and Energy Major Projects report it states in the six month period from November 2013 to April 2014 (inclusive), 21 resources and energy projects were completed that together were valued at $25.6 billion.

At the Committed Stage, the highest level for project that have yet to be developed, the BREE report stated that investment in LNG, gas and oil projects continues to be the main driver of resources and energy investment in Australia. 14 LNG, gas and oil projects at the Committed Stage have a combined value of $197 billion and account for 86 per cent of committed investment for the Australian resources sector.

At the other end of the scale, the BREE report also found that the petroleum sector continues to have strong investment interest with a combined proposed CAPEX of between $28.5 billion and $30.5 billion at the early level Publicly Announced Stage. This has increased by around $4 billion as a result of the Arrow LNG project dropping back from the Feasibility Stage and the addition of Woodside’s Persephone gas field project.

With the total value of projects in the Publicly Announced Stage outweighing the value of the projects which have been completed in the past six months, this provides a strong indication that the project pipeline is certainly not drying up anytime soon and in fact, will be fruitful for years to come.

Longer term investment predictions also remains strong at the next level, the Feasibility Stage, with eight LNG, gas and oil projects identified with a combined investment value of $43 billion.

While there is no doubt that the record levels of construction investment in Australian oil and gas projects (in particular the world-class LNG developments) is slowing down, there is still a large book of proposed developments that should keep the service and supply sector busy in this country for some time to come.

Onshore, there are also very significant opportunities to support the rapidly developing unconventional oil and gas scene that is already attracting significant international investment, while offshore there is a big move within the inspection, testing, repair, maintenance sector to support the newly completed, under development and the proposed projects.

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