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No new Australian LNG projects doesn't mean no new LNG


Source: Reuters, 9 June 2016

Conventional wisdom in the liquefied natural gas (LNG) sector is that no new projects will be built for several years, given the vast cost can't be reconciled with the current low prices.

This view has led some in the industry to predict that the market will flip back to a structural shortage sometime in the early to mid-2020s, once again sending prices soaring as new supply takes so long to be built and become operational.

However, Australian LNG producers can boost volumes if demand warrants increased supply.  "Boys and girls don't like to share their train sets," was how Kavonic put it, a jest that rings true when looking at the three adjacent coal-seam gas to LNG plants recently built at Gladstone, on Australia's east coast.

These plants don't share infrastructure even though it would have been more cost-effective for all concerned if they had jointly developed facilities such as pipelines, storage, jetties and power supply.

Perhaps the expected period of low prices in the next few years will encourage the sort of innovation and cooperation that would allow LNG producers to increase output at competitive costs should demand grow strongly in the 2020s.

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