The Wall Street Journal reports that entry into the gas age is not without pain fopr would be exporters of Australian natural gas - Australia's Gas Pains.

Seven LNG projects now under construction in Australia are expected to cost 140 billion Australian dollars (US$144 billion). By 2020, Australia could produce as much as one quarter of the world's LNG—up from less than a tenth today—making it one of the world's top two producers alongside Qatar.

The price of such rapid growth will be high. Resource workers are expensive and will become more so as the market for labor remains tight. Woodside Petroleum has already seen cost overruns of US$3 billion at its giant Pluto LNG project in Western Australia, partly because of labor shortages.

The soaring Australian dollar, up 65% against the U.S. dollar since the worst of the financial crisis, is also pushing up the cost of business for resources companies.

Australia-listed Oil Search said last month the dollar's rise has pushed up the budget on its Papua New Guinea project, operated by Exxon Mobil, by US$700 million, or nearly 5%.

BernsteinResearch says the cost per ton of Australian LNG could average as much as US$4,000, compared with about US$1,000 at Apache's Kitimat project in western Canada.

For Australia's LNG projects, politics are an unwelcome obstacle. There are moves at federal and state levels that could limit gas extraction on vast tracts of land deemed critical to the country's agricultural production. That shouldn't affect existing projects, though it could temper expansion—which actually could help Australia avoid the worst labor shortages.

Meanwhile, pressure is building to get the Australian projects up and running soon. Qatar—which produces some of the world's lowest-cost LNG—has a moratorium on further development of its gigantic North field in order to preserve its longevity. But the self-imposed ban ends in 2013.

The ABC reports that Inpex are optimistic about their project going ahead - Inpex LNG venture tipped to attract investors.

A senior economist says he expects Inpex will have no trouble in securing investors for its planned multi-billion dollar gas project in Darwin. The Japanese company announced yesterday that it had already sold its total projected liquefied natural gas output from the proposed operation.

A final investment decision on the project, to pump gas from the Timor Sea to Darwin via a 900 kilometre pipeline, is yet to be announced. But it is believed Inpex hopes initial construction work will begin in March.

Macquarie Bank senior economist Brian Redican says investors are likely to view the project as a low-risk venture. He says a surge in oil prices in recent years means Inpex is in a strong position to secure investors. "Because petrol prices and energy prices are so high, they are actually extraordinarily profitable at the moment," he said.

The Australian has yet another report on the prospect of the US exporting LNG from shale gas - US to enter LNG export market amid domestic supply glut. It will interesting to see the reaction in the US if local gas prices converge with those in Asian export markets (the same unpleasant adjustment that is beginning in Australia already).

AUSTRALIAN gas exporters had better watch out - there's a new kid on the block. The US could emerge as a major competitor to Australia’s burgeoning gas-export market, challenging the viability or expansion plans of close to a dozen Australian liquefied natural gas projects, according to Noel Tomnay, the head of global gas at UK-based energy consultancy Wood Mackenzie.

Traditionally an importer of gas, the US is experiencing a domestic supply glut owing to heavy investment in the production of shale gas in states like Texas. That’s depressing US gas prices and prompting some companies to investigate the potential of terminals on the US coast geared for export to take advantage of higher prices abroad.

Cheniere Energy recently signed two long-term gas supply deals with offtakers, including with BG Group, as it presses ahead with plans to build the first LNG export terminal in the US. Last month, Cheniere said it has enough supply locked into long-term contracts to start construction of a proposed LNG export terminal in Sabine Pass, Louisiana, in 2012.

Tomnay told Deal Journal Australia: "We’re of the view that North America will have 20 million tonnes of LNG capacity maybe as early as 2018. Consequently, that will remove potential market share for Australian LNG projects."

Investment totalling more than $140 billion has been earmarked for new Australian LNG terminals focused mainly on Asia since 2007, which could catapult Australia ahead of Qatar as the world’s largest LNG exporter within a decade. In the latest development yesterday, Japan’s Inpex signed 15-year deals to supply five Japanese utilities with $US70 billion ($68.3bn) worth of LNG from its proposed Ichthys project in the Northern Territory.

The other risk facing would be LNG exporters to Asia is China taking its first steps towards producing shale gas - Chinese shale gas find may cut LNG demand
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ROYAL Dutch Shell has found shale gas in China, prompting fears that the country could develop enough domestic supply to limit imports of liquefied natural gas. An official at PetroChina, Shell's partner in the region, told Reuters that results from two wells had been positive.

In less than a decade shale gas has transformed the US from gas shortage to a point where companies are planning to export LNG, fundamentally altering the dynamics of the international gas market. Existing LNG producers had hoped that higher demand from China would offset the decline in imports to the US.

Shale gas is obtained by hydraulically fracturing rock, which requires large quantities of water and chemicals. There is concern among environmentalists that the process can contaminate groundwater supplies.

Analysts have predicted shale gas could supply up to half the natural gas produced in North America by the end of this decade.

The Australian reports that Korean utility Kogas is soon to sign up to purchase around $84 billion of natural gas from offshore Australian developments - Shell’s Prelude floating LNG project and the Inpex / Total owned Ichthys field - Australia in 84 billion dollar LNG deal with South Korea.

AUSTRALIA is set to supply millions of tonnes of liquefied natural gas to South Korea over the next 20 years under an historic deal worth billions of dollars.

South Korea's government last night approved two deals worth $US84 billion sought by the country's state-run Korea Gas Corporation to import more than five million metric tonnes per year of LNG, the bulk of which will come from Australia.

The deals, the biggest in South Korea's history, are with Royal Dutch Shell Plc and Total SA.
The state-run utility will buy 3.64 million metric tons of LNG a year from Shell's Prelude gas project in Australia for 26 years starting 2014, the Ministry of Knowledge Economy said in a statement. It will also buy 2 million tons of the fuel a year from Total's Ichthys field gas projects in Australia and other fields in Nigeria, Norway and Egypt for 18 years starting 2014.

The shipments are valued at $US84 billion and are equivalent to 17 percent of Korea's gas consumption in 2010, according to the statement.

The ABC reports that the government has given the go-ahead to Inpex's Ichthys LNG project off the north west coast of Australia - Government approves $12b Inpex gas project.

The Federal Government has given the green light for a multi-billion-dollar gas plant to be built in Darwin.

Japanese company Inpex will now be able to press ahead with building a gas field facility about 800 kilometres from Darwin, and a pipeline from there to a processing facility in the NT capital, after Federal Environment Minister Tony Burke gave approval for the project.

Mr Burke says there will be significant economic benefits from the $12 billion project, but says he has only given his approval under strict environmental conditions. Mr Burke says that includes conditions on dredging to ensure dolphins, dugongs and turtles are protected.

Inpex will be able to produce liquefied natural and petroleum gas through offshore processing, and build an 850-kilometre pipeline and an onshore processing facility in Darwin Harbour. But the company will be required to protect and manage about 2,000 hectares of vegetation and a marine habitat.

Mr Burke says it is now up to the company to decide whether to invest in the plant.

The SMH has more - Gas project green to go.

The Ichthys project is considered more robust than most other proposed LNG export projects in Australia because its gas will come to the surface with a rich stream of condensate (light oil) and other petroleum liquids. The condensate and other liquids will be stripped from the gas stream at Ichthys's offshore location, with the gas then piped to the LNG plant in Darwin for eventual export, mainly to Japan.

On an annual basis, the project is expected to produce 8.4 million tonnes of LNG and 1.6 million tonnes of liquefied petroleum gas (propane). The project sweetener is the 100,000 barrels-a-day of condensate that the project is forecast to produce at its peak.

BusinessWeek reports that the Ichthys LNG plant has stalled once again - Inpex Delays Investment Decision on Ichthys LNG.

Inpex Corp., Japan’s largest energy explorer, has delayed for a second time a final investment decision and the start of commercial operation for its proposed $20 billion liquefied natural gas project in Australia.

The company won’t make the decision this year or start operations in 2015, as previously planned, Director Masahiro Murayama told reporters in Tokyo today without providing a reason for the delay.

Inpex, the operator of the venture, and partner Total SA are seeking to capitalize on Asia’s growing demand for the cleaner fuel. Natural gas futures in New York fell yesterday on forecasts inventory increases will continue to be larger than normal as consumption fails to keep pace with expectations.

“Inpex has probably been reviewing the structure of the Ichthys project’s cost, at a time global gas demand growth is slowing briefly,” Hidetoshi Shioda, a senior energy analyst at Mizuho Securities Co., said by telephone from Tokyo.

In November, Inpex delayed the investment decision from the first half of this year until the second half because more time was needed for pre-engineering and design work for offshore facilities, including pipelines and a floating production unit.

The plant will process gas from the WA-285-P field, 850 kilometers (530 miles) off the coast of northern Australia, and have an annual capacity of 8 million metric tons.

The story was front page news in the Territory, albeit considered slightly less important than an environmental news story looking at the behaviour of native fauna.

Crikey has a rumour that Inpex's proposed Ichthys LNG project has been delayed once again - Gas project on hold ... again.

For the second time six months the Japanese group, Inpex, has postponed a final decision on the huge Ichthys LNG project off the Northern Territory coast. Inpex announced Darwin as the base for the project in late 2008, a year later it delayed the final decision until late this year or early 2011. Now according to reports from the recent Australian Oil and Gas Conference, it is now delayed until late next year.

The first delay was ostensibly due to rising costs of construction, but oil industry analysts say it was more to do with the rapid emergence of an LNG glut in Asia thanks to the impact of the recession in Japan, Korea and Taiwan. The Inpex project is huge, media estimates put it at $A20 to $A24 billion, which would be the size of the North West Shelf. An industry informant says announcement of the delay is being held back until May to coincide with the presentation of Inpex's 2009 results in Japan.

The Australian reports that Japanese company Inpex has decided to build its LNG export facility for the Ichthys field in the Browse Basin in Darwin instead of in Western Australia - Northern Territory wins $24bn Japanese gas plant.

ONE of the biggest private investments in Australian history was clinched yesterday when Japanese gas giant Inpex chose Darwin harbour as the site for a multi-billion-dollar LNG plant that will process eight million tonnes of gas piped from the Browse Basin off the northern West Australian coast.

The announcement that Inpex planned to pipe gas 850km across the Timor Sea in favour of processing the LNG at a hub in the Kimberley ended months of competition between the Northern Territory and Western Australia. The deal cements Darwin's status as a major industrial and commercial centre, but WA's loss was greeted with bitter disappointment by the Kimberley's Aboriginal Land Council, which had pinned its hopes on the plant as a way of out of poverty for remote-living indigenous people.

Inpex's Japanese president Naoki Kuroda, announcing the deal in Darwin yesterday, said that at the expected gas processing rate of 1.6 million tonnes of LNG per annum, the plant would produce the equivalent of 50 per cent of Australia's current [LNG] production.

Mr Kuroda said the NT Government had been able to provide certainty for the $24billion investment, with the Japanese Government pushing to meet a tight deadline to guarantee the security of Japan's future gas supply.

Federal Minister for Resources and Energy Martin Ferguson said yesterday the project was "potentially the biggest investment in Australia's history" and would cement Australia's world standing as an "energy superpower". "It will prove to be side-by-side with the expansion of the Olympic Dam in South Australia," Mr Ferguson said.