Rise In LNG Exports Could Bring Some Cheer

BMI View: Exports of liquefied natural gas (LNG) from Australia are set to rise from 2015 onwards as more terminals come online, and strong demand from Asian countries could see outbound shipments rise to as high as 15-20% of Australia's total export basket by 2017. Our core scenario is for the rise in LNG exports to help moderate the impact of declines in iron ore shipments beyond 2015, although higher upfront investment is likely to lift near-term import growth. That said, there remains significant risks, both to the upside and downside, given uncertainties within the domestic regulatory arena and the changing response of buyer nations.

Australia's growing gas export capabilities and accessible reserves have been mostly overshadowed by the country's mineral ore (iron and coal) export boom, but this is likely to change dramatically in the near future. Indeed, the surge in energy demand from North Asia, together with improving technology and vast infrastructure under construction, will likely push this industry into the limelight in the coming years. Compared to other key liquefied natural gas (LNG) export countries, the amount of liquification capacity (or LNG terminals) due to come online could propel Australia to the top of the exporter's league table, possibly supplying up to 25% of the world's gas trade by 2017 versus the current 8.6% (as of 2012). The International Energy Agency has even touted the possibilities for Australian gas exports to exceed that of Qatar in the near future, currently the world's main exporter of natural gas.

While LNG exports could have a significant positive impact on Australia's overall export performance, uncertainties are rife and the outlook of other key exports is dimming. Indeed, we expect iron ore shipments to decline over the coming years, as growth in demand for steel slows, weighed down by ongoing rebalancing within the Chinese economy. As such, we outline three possible scenarios below.

Gas Exports Could Potentially Take The Lead
Australia - Key Exports (LHS, US$bn) & Forecasted Timetable For Australian LNG Capacity To Come Online (RHS, bcm)

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This article is tagged to:
Sector: Country Risk
Geography: Australia

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