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Editorial comment

Back in 2012, shortly after I took on the role as Editor of Hydrocarbon Engineering’s sister publication, LNG Industry magazine, Shell began construction on a major new project that was (and still is) the talk of the LNG sector. Five years later, the Prelude floating LNG (FLNG) facility arrived at its final location in the Browse Basin, Western Australia, last year. Mooring, hook-up and commissioning activities are now underway before the project is expected to start operations later this year. Once up and running, the giant Prelude FLNG facility – which is longer than four soccer fields – will have a production capacity of at least 5.3 million tpy of liquids (3.6 million tpy of LNG, 1.3 million tpy of condensate and 0.4 million tpy of LPG).

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Prelude FLNG is one of three remaining LNG projects currently under construction in Australia that is set for completion this year, alongside Inpex’s Ichthys LNG project and the second train at Chevron’s Wheatstone project. According to the latest ‘Resources and Energy Quarterly’ from the Department of Industry, Innovation and Science, these three projects are set to bring Australia’s total nameplate capacity to 88 million t, as the country readies itself to dethrone Qatar as the world’s largest LNG exporter.1 The report suggests that Australia’s LNG export volumes will reach 77 million t in 2018 – 2019, up from 52 million t in 2016 – 2017.

All of this follows a “watershed year” for Australia’s LNG industry in 2017, as described by EnergyQuest’s CEO, Dr Graeme Bethune.2 The energy consultancy recently reported that Australian LNG exports hit 56.8 million t in 2017, rising 26.3% from 2016, on the back of increased demand from China (up 40.5% from 12.4 million t to 17.5 million t). Higher oil prices and increased volumes pushed the country’s LNG export revenue up 44.1% to AUS$25.8 billion last year.

Despite the rosy outlook for the country’s LNG sector in the short-term, a number of uncertainties remain. The Department of Industry, Innovation and Science warns that as competition intensifies in global LNG markets (particularly from the US), the cost competitiveness of Australian LNG projects and the amount of flexibility in its contracts remain cause for concern: “LNG contracts often include clauses which allow buyers to reduce purchases to minimum ‘take-or-pay’ levels. It is possible buyers may utilise these ‘take-or-pay’ provisions in their oil-linked contracts if oil prices are higher than spot prices, or if they become over-contracted for LNG.”

The land down under is certainly going to be a fascinating market to watch in the years ahead. In this issue of Hydrocarbon Engineering, Dr Nancy Yamaguchi provides a detailed overview of the country’s energy sector, as it attempts to strike a balance between the economic security offered by its fossil energy industry and its growing desire to protect the environment and its heritage (p. 12).

1. ‘Resources and Energy Quarterly’, Australian Government Department of Industry, Innovation and Science, (December 2017).

2. ‘Australian LNG industry riding high on China boom’, EnergyQuest, (21 January 2018).

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