The Australian has a stunningly suspect article downplaying the prospects for Australian LNG exports to China. Given that these LNG projects only get built when long term supply deals are signed with Asian customers (who often take an equity stake in the projects) its hard to understand the motive here (no pipeline from Russia seems likely in the next decade and the prospect of US shale gas LNG exports being significantly cheaper than Australian natural gas or coal seam gas LNG exports doesn't seem particularly plausible either).
Nevertheless, some investment banks seem keen to push the idea, for whatever reason (on the plus side it would keep gas cheap on the east coast in the coming years) - I always love when the sources have to remain anonymous, in this case for "compliance reasons" ! - China's LNG demand questioned.
As Australia prepares itself for the economic bonanza that will stem from the construction of LNG projects in Western Australia and Queensland, those keeping a close eye on how China is meeting its energy needs are raising their eyebrows at the Australian plans.
More than $200 billion in LNG projects is planned or already in construction, potentially leading Australia to challenge Qatar for the title of the world's biggest producer. Removed from the hysteria surrounding Australia's LNG construction frenzy, the Asia-based analysts who scrutinise China's energy needs are questioning whether China will be the increasingly LNG-hungry nation the Australian LNG proponents need it to be.
That's not to say China's gas demand isn't growing dramatically. The China Gas Association is tipping a fourfold increase in Chinese gas consumption by 2020, while state-owned energy giant PetroChina is tipping a trebling in demand over the same timeframe. The central government has mandated for China to increase its gas consumption over the coming years, in part on environmental grounds. Gas currently accounts for around 5 per cent of China's energy mix, compared with an average of around 20 per cent in other developed nations.
The problem for Australia, however, is that LNG is but one of a number of potential sources for gas. And when it comes to competing with those other sources, LNG is set to be the most expensive.
While China has been actively lining up sources of Australian LNG, including deals with the Chevron-led Gorgon and Wheatstone projects and a number of coal-seam gas-fed LNG developments in Queensland, it has also been securing a wide number of alternative supplies.
Much of the country's gas is already piped in from the Central Asian nation of Turkmenistan and there is talk of a new pipeline that could bring much more. China and Russia have been in discussions for several years over the prospect of piping gas in from Russia and if and when the deal is done, it will be at a price below that of LNG.
The stunning growth in gas reserves in North America following breakthroughs in shale gas and coal-seam gas technology has raised the prospect of Canada and the US exporting cheap LNG.
And the real wildcard is China's own domestic gas industry, which is looking to tap the same technology and techniques that have turned North American gas markets on their heads. Studies suggest that China could host as much, if not more, gas than North America and this could have a major impact on China's appetite for Australian LNG. ...
Another Hong Kong-based analyst, who cannot be named for compliance reasons, is also scratching his head over the demand picture facing Australian LNG projects. "Should they be worried? Absolutely," he says. "But not only because of the potential for shale in China but also because of gas out of Russia and pipeline gas out of Central Asia and also lower-cost potential LNG out of Canada and the US. All of it can be brought in at far below the rising cost of LNG out of Australia."