Australia has eight operating LNG projects and two under construction. Together, the two new projects, Icthys and Prelude, along with the recently operational Wheatstone project, will add around 21 million tonnes to Australia's LNG export capacity which according to the Department of Industry, Innovation and Science' latest report, are forecast to reach 74 million tonnes in 2018-19. However, as the construction phase comes to an end, it is expected that some projects will continue to be impacted by post-construction dispute resolution processes for some years.

While no further LNG projects are on the horizon in Australia, Papua New Guinea is backing a new greenfield project (Papua LNG ) led by Total, in addition to an expansion of the existing Exxon Mobil PNG LNG project.

Political intervention in the market

The Australian domestic gas security mechanism, put in place by the federal government earlier this year, allows the minister to impose restrictions on LNG export on a year to year basis by declaring a shortfall year. Despite a gas shortfall forecast for 2018, declaration of a shortfall year has been averted this year by the three largest gas producers agreeing to supply domestic gas.

The government's cautious approach to LNG export restrictions can be linked to Australia negotiating the Regional Comprehensive Economic Partnership with ASEAN and Japan, China, South Korea, India and New Zealand. Placing export restrictions on projects that sell LNG to Japanese, Korean and Chinese buyers would not align with Australia's international trade and investment strategy.

If the government were to trigger export restrictions, the chances of successfully pursuing legal remedies against the Australian government would not be high, at least in the current LNG market awash with spot cargoes available to substitute the east coast sourced LNG.

Will Australia, the world's second largest LNG exporter that is forecast to overtake Qatar in the next decade, become an LNG importer?

To address a tightening of gas supplies on the east coast, AGL Energy has proposed a floating regas terminal in Victoria to bring LNG cargoes from Western Australia or Singapore. Whilst there are suggestions that the cost of bringing liquid cargoes to the east coast is cheaper than the cost of piping gas from Queensland to Victoria, whether AGL's project will go ahead remains to be seen. Cabotage issues are among the many concerns for AGL to address.

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