Australia may have captured the lion’s share of new liquefied natural gas (LNG) projects approved since 2010, and be set to overtake Qatar as the world’s top supplier of LNG. But the outlook for a further round of Australian LNG projects is clouded by increasing international competition and ongoing concerns over escalating costs.

This was the message that attendees of Hart Energy’s DUG Australia conference heard in Brisbane from Tri-Zen Principal Consultant Tony Regan, who reminded the conference that the long-term development of shale gas in Australia would depend on the competitive ability of the country’s LNG projects to access international LNG markets.

Regan recalled that in 2010 there were some 74 million tonnes per annum (tpa) of new capacity in LNG projects that were planned to reach final investment decision (FID) that year.

But, in the wake of the 2008-2009 financial crisis, most of these projects “fell by the wayside,” leaving Australia’s three coal seam gas-to-LNG projects on Curtis Island— Gladstone LNG, Queensland Curtis and Australia Pacific—as the only projects to go ahead. Australia was “the only show in town,” with the three projects collectively comprising some 25.3 million tpa of new capacity.

Today, LNG capacity under construction amounts to a “very impressive” total of just over 100 million tpa. The Australian contribution makes up 60% of all new capacity and—in addition to the three Curtis Island projects—comprises Gorgon, Wheatstone, Prelude and Ichthys. Elsewhere, there are projects under way in Algeria, Colombia, Malaysia, Papua New Guinea and the U.S.

These projects will result in “dramatic changes” in regional LNG productive capacity. Assuming the projects come online as scheduled, Australia will rise from a “mid-ranked” producer behind Indonesia and Malaysia to become the world’s largest LNG producer, potentially overtaking Qatar, by 2017.

But what is the outlook for a further round of Australian LNG projects?

“We have probably just as much tonnage being offered in the next round in Australia as in the last round,” said Regan. “The real issue is: Can any of that go ahead?”

As a “big reality check,” however, Regan said, “Australia has a huge problem with cost inflation.” He noted that Gorgon had seen costs go up by 40%, while Queensland Curtis had seen costs rise by 36%—cost increases that were “absolutely unprecedented.” In addition, Ichthys was expected to come in at $34 billion, he said.

“Australia has priced itself out of the market,” said Regan, expressing skepticism “how any of the next round of LNG projects can go ahead in Australia.”

Regan cited a “mixed bag” of projects making up some 57.6 million tpa in Australia’s next round of LNG capacity. Of these, the Browse project “might” be able to reach FID, according to Regan, in the wake of Woodside’s decision to no longer pursue it as an onshore project and instead develop it as a floating LNG (FLNG) project, which should reduce costs by some 30% or possibly more.

“But even if it is an FLNG project, it is not a slam dunk,” said Regan. “And if Browse does go to FLNG, almost everything in Western Australia will go to FLNG. It will be the way to go. We may not see any more deepwater offshore production coming onshore for liquefaction.”

In sum, said Regan, Australia today faces “far more competition. Australia was the only show in town in 2010; it is definitely not in 2013.”

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