Wood Mackenzie says that while the scheduling of CSG-LNG projects has generally remained firm, the timing of others – including the Chevron-operated Gorgon and Wheatstone developments – have been pushed back.
As a result, the Australian LNG ramp-up in WoodMac’s forthcoming update will include 11 million tonnes less than expected between 2015 and 2019.
However, CSG-LNG’s reliability will soon be tested, with WoodMac concerned about how each operator will ramp up a significant volume of gas in a very short time.
“The most productive wells will supply the first train of each project, but risk remains around the deliverability and consistency of the following supply tiers that will feed the second trains,” the analyst said.
“BG has managed its first train at the QCLNG project well so far but with only one out of six producing, the successful delivery of the remaining trains will dictate whether CSG-LNG ramp up is a success.
“Another key uncertainty is the speed and consistency of the ramp up of Train 2. Around 1000 wells will be drilled each year to maintain momentum but the ability of operators to manage this activity as well as operate an LNG plant has not yet been tried.”
The next wave of LNG from Australia will start in 2017 and it will be exposed to a different economic climate, labour market and changing cost environment than the first tranche of projects.
“We believe that strong project management will be key to keeping these developments on track and ensuring that they can meet our revised timelines,” WoodMac said in its most recent report.
Chinese scramble
Yet while there is constant talk of a supply side glut, China is scrambling to cater for the next large tranches of LNG supply from Australia, according to consultancy PIRA Energy Group.
“The clock is ticking on the next large tranches of LNG supply coming out of Australia and Chinese buyers will be battling time to fire up new import capacity to accommodate the expected volumes – all of which are under long-term take or pay contracts with limited destination flexibility under the current structures,” PIRA Group said.
Sinopec signed up in April 2011 as a foundation customer and part-equity owner in the Australia Pacific LNG project, taking 7.6 million tonnes per annum in a 20-year off-take agreement. Sinopec is China’s second largest crude oil and gas producer and its largest petroleum products and chemicals producer and supplier.
BG Group’s Queensland Curtis LNG project has global sales agreements for nearly 10MMtpa with the China National Offshore Oil Corporation and other customers from Japan, Chile and Singapore.
APLNG upstream operator Origin Energy announced last week it had delayed project start-up from September this year to October, with CEO Grant King telling the Macquarie conference in Sydney that sustained production would not occur until the December quarter.
