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Here Come the Aussies

by | published May 21st, 2012

Peter Coleman is 52 years old, but his baby face makes him look years younger.

You should not let that fool you. Among other things, this savvy Aussie oil and gas executive is also a Western Australia Football Commissioner.

You know, that unique sport where you get to run up the score into triple digits while kicking your opponent in the teeth.

These days, Peter is in the middle of a major shift in the global liquefied natural gas (LNG) pecking order. Don’t look now, but the order is about to see a new global leader… Australia!

Prior to this point, market observers had usually considered the country to be a fringe player in the global oil and gas trade.

That ‘s about to change.

Projections now put the country on schedule to displace Qatar as the major LNG exporter worldwide. Rising from nothing at the beginning of this decade, the country will be exporting at least 80 million tons of gas each year by 2020.

I first met Peter three years ago when he was still vice president for Asia and the Pacific at global oil and gas giant ExxonMobil Corp. (NYSE: XOM). At the time, I was consulting on the massive Gorgon offshore natural gas project north of Perth on the Australian west coast.

Gorgon is led by Chevron Corp. (NYSE: CVX) and involves what, at the time, was one of the first subsea gas gathering infrastructure networks ever attempted on a system of fields this size.

(By the way, they are still finding gas in this region).

Gorgon is Chevron’s largest project worldwide, but it is only one of three major projects in that part of Australia. All three are priming up to move LNG into the global market.

Initially, there was significant concern that the combination of projects would end up flooding the Asian market with gas, and end up driving down the price. Chevron has 47% of the Gorgon operation, but the project also includes majors Exxon and Royal Dutch/Shell (NYSE: RDS-A), along with three Japanese end users as minority participants.

And that was the potential downside.

Exxon has its own project in Papua New Guinea also coming on line. The other two main Gorgon partners worried Exxon would lock up long-term Japanese LNG end- user contracts, squeezing out Gorgon along with the other two northwest Australian projects.

Peter played his cards close to chest in those days, and you could never read his face very easily. His words are always measured, leaving you with the distinct impression that the other shoe is about to drop.

You also come away with the feeling he is providing only what he thinks you already know.

Well, all that angst ended when China announced it was building five new coastal LNG receiving facilities simultaneously. The result has been nothing short of staggering. All of the projected volume from all of the Australian and New Guinean projects is now tied up in 15- to 20-year delivery contracts.

One of the central Australian players in all of this is Woodside Petroleum – trading primarily on the Australian Stock Exchange (ASX) but available in a thinly-traded U.S. market pink sheet issue – OTC: WOPEY.

And that is where Peter comes back in.

For the past year, he has been CEO of Woodside.

Woodside has been paring its stakes somewhat in gas production projects, but it has just begun exporting from its huge $14.7 billion Pluto LNG terminal. The first consignment went off to Japan late last month. That facility will be moving at least 4.3 million tons a year with an expansion possible.

The Pluto and Xena projects remain under the control of Woodbine. But the company also believes that other gas producers will satisfy additional export capacity beyond Woodbine’s production levels .

Asia remains the single greatest consumer market (until the international boon began a few years ago, more than 70% of all LNG in the world was sold either to Japan or South Korea).

Still the competition will be increasing from Russian and U.S.-based production, and the question is whether the market can sustain the rapidly accelerating volume becoming available.

That just happened to be one of the main topics Peter discussed yesterday (May 20) in an interview with Wall Street Asia‘s David Winning.

In the process, another “ringer” was introduced.

It seems that Australia has significantly more shale gas than originally thought. It remains too early to estimate how much of this will find its way onto the market, or the time it will take to construct the necessary infrastructure, develop the field systems, extract, and process the gas.

In the interview, Peter was again quite measured in his responses. While most would turn to the recent history in North America and point toward a similar result in Australia, Peter takes the more cautious approach – awaiting geological determinations of actual basin structures.

Nonetheless, whether the gas will be coming from abundance offshore or locked within rock onshore, one thing is becoming quite clear.

Australia is now a leading international force and market maker in the natural gas sector.

Sincerely,

Kent

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  1. Geoffrey Kelly
    May 21st, 2012 at 13:07 | #1

    Woodside Petroleum has been exporting large quantities of natural gas to Japan for over 20 years. On a plane from Australia to London in the 1980’s I sat next to a Shell engineer who told me I should buy Woodside shares which were then around $1-50 as long term they would be very valuable. I did and traded in and out for a few years, finally selling out the last lot at around $3.00. Last time I looked they were north of $40 thought there may have been reverse splits. Australia has also been using LNG in commercial car fleets for 20 years. I can’t understand why this has not happened to the same degree in the USA. Maybe petrol (gas) is just too cheap in America.

  2. Wayne Olmstead
    May 21st, 2012 at 13:11 | #2

    With all of the Natural Gas know reserves here in the U.S.A. and that is being discovered in Australia, Europe and Asia, it s hard to see how the price of NG is going to recover in the near future if at all. I know the usage is projected to increase, but it doesn’t appear to keep up with the discoveries. Could you comment on that?

  3. Hla Tin, Ph.D.
    May 21st, 2012 at 13:22 | #3

    Dear Dr. Moore,

    I understand Noble signed a contract to drill in Myanmar soon, after winning the bid process over there.I heard this from the private sources in Myanmar. Presently, China and Thailand are buying natural gas from Myanmar.

    I am curious how much ownership does the host country share in these deals usually, without capital contribution?

  4. Virgil Huntsinger
    May 21st, 2012 at 13:24 | #4

    Woodside = Woodbine?????????

  5. terry
    May 21st, 2012 at 14:06 | #5

    It seems that Dr Moors is also capable of measured remarks?

  6. May 21st, 2012 at 14:22 | #6

    I have been in Tag oil”taoif” a couple of times and it trades rather sporadically. What is your take on an Aussie oil producer.

  7. Tony
    May 21st, 2012 at 16:19 | #7

    The big question is price? Can Australia compete when they are currently getting substantially higher prices for their gas than current prices in the USA?The big LNG projects were costed when gas was running at more than double the current price and this was percieved to be low then?

  8. pt49
    May 21st, 2012 at 17:45 | #8

    I was wondering how long it would take you guys to realize just how much and for how long us Aussies have been exporting LNG. Most investors think this is a new industry, but in actual fact its been around since about WWII (tho not in Oz).

    The next big player after Australia that you guys never mention is Iraq. Iraq is poised to become once again the 2nd largest oil producer in the world… by the end of this year!

    Hoever the more important thing about Iraq could be the enormous fields of natural gas being discovered, and with the country being midway between Europe and India (massive population centres) I can envisage that it would be economical to transport natual gas to those area’s from Iraq by pipeline.

  9. Ed Nichol
    May 21st, 2012 at 23:08 | #9

    Are there supply/demand charts. The politicals in Alberta-British Columbia are being sold a bill of goods on the export potential. The route is insane and only the service suppliers will make any money. Oh yes, bless Dutch Shell.

  10. Aussie Fan
    May 22nd, 2012 at 00:28 | #10

    Your comment on Aussie LNG seems all about picking the headlines and writing the spin!! Do you relaly understand what is ahppening in Australia, and where the real long term projects are stacking up, I am talking unconventional here.Gorgon is offshore and conventional. But it is big, but expensive. Who were you consulting for??

    Australia is now moving into its massive shale basins. You didn’t mention these. Is it that you are unaware of what is happening here, or is it thant it is just not yet headline news?

  11. pt49
    May 22nd, 2012 at 01:14 | #11

    I see the main export problem for Nth American gas suppliers is the tyrany of distance. There are obviously massive basins of natural gas a lot closer to the major population centres in the world (China, India and Sth East Asia primarily) than Nth America.

  12. ted plottner
    May 22nd, 2012 at 03:29 | #12

    dr. Kent………..does this mean it is safe bet to invest in aussie currency…..or energy fund….or directly into a gas company……I am a small investor trying to have stocks away from dollar

  13. S.L.Floyd
    May 22nd, 2012 at 21:27 | #13

    Thank you Dr.Kent for the info. As you are next to none at keeping me informed. Just to clearfication are you suggesting this is a good time to invest in oil in Austrai?

  14. pt49
    May 23rd, 2012 at 01:42 | #14

    Hi Ted, his advice would be to invest in his newsletter.

  15. eric taylor
    May 25th, 2012 at 18:55 | #15

    I really prefer Australian rule football to all other rugby and
    American football types, with its huge football field shape rounded
    like a football. Looks like oil and gas business will get here much faster than the structurally devisive sport of football. Shale
    is all over the world for the taking, which scares me out of
    believing the U.S. gas boom is unique, and that our gas interests
    will lag longer than expected as a new and growing trend goes global.

  16. Lynn
    June 1st, 2012 at 06:17 | #16

    Am I dreaming or does everyone have blinkers on their greed buttons. Yes of course its going to be huge money for the early birds in the right places/times, its been arranged and other better alternate energy sources depressed (for something like 80 decades). Has anyone for a moment stopped to think for one moment the repercussions fracking has on, not only our drinking water and general health, but the place we abide in namely Earth. Plenty of proof, everywhere. Yes I believe some have a special reserved spot out there somewhere in space, it won’t be you. What happens when something gets under your skin and starts erupting, exploding destroying the skin, you either eventually die…a horrible death, or you manage to get rid of the pesky parasites by any way possible. Don’t make the arrogant mistake of thinking you (human) are the ultimate intelligence… far from it. History tells us that any genus that becomes overcrowded usually commits suicide as a race/genus. Looks like we are ripe.

  17. enthusceptic
    April 13th, 2013 at 09:41 | #17

    News have to be new to be news.

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