100th cargo sails into a growing market

The 100th cargo of LNG left the Gorgon Project in Western Australia at the end of June marking a milestone for one of the world’s largest natural gas projects and the largest single resource development in Australia’s history.

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100th cargo sails into a growing market

The West Barracouta development, located in the VIC/L1 block offshore Victoria, will provide much-needed gas for the Australian domestic market by 2021.

ExxonMobil Australia Chairman, Nathan Fay, said he was extremely proud of the teams’ efforts to complete the West Barracouta wells in spite of the additional pressures of COVID-19.

“The drilling program was only partly completed when we started activating our COVID-19 response. This presented significant challenges for the team, especially when you consider we needed to manage strict workforce and process restrictions on the Noble Tom Prosser drilling rig.

 “Despite the increased challenges presented by the COVID-19 pandemic, the Australia Upstream Integrated Solutions Wells team were able to complete drilling these wells safely,” said Nathan.

 “That the team has been able to maintain their focus to flawlessly execute this work, with everything else that is going on in the world around us at the moment, is something we should all be immensely proud of.”

The team will now turn their attention to construction of associated gas production infrastructure that will link the West Barracouta development back to the existing Barracouta field. This construction is set to be completed in early 2021, with West Barracouta gas expected to be flowing to Australia soon after. 

“While we continue to work on the West Barracouta development, due to COVID-19 related challenges, we will pause the other drilling work that was planned for the remainder of this year and review timing for this program of works.” said Nathan.

“These are unprecedented times and we’ve had to adjust work plans so we can focus on keeping our workforce safe, and maintain our critical operations and supply of energy to Australia.”

Photo — An LNG tanker leaves the jetty at Barrow Island. “LNG projects involve huge investments that bring tremendous economic value to gas-rich nations.”

The world’s use of natural gas is projected to increase in coming decades more than any other energy source and most of this growth is in the Asia Pacific. With LNG becoming a bigger part of the gas distribution mix, it offers huge opportunities for LNG exporters in the future.

“Right now there is an oversupply of LNG on the global market,” said Jeff Appleton, Senior Vice President, LNG. “This is driving a lot of activity in the spot market.

“The industry has recently had a large number of Australian and North American projects sanctioned, and if all this LNG finds a market, trade will grow around 22 percent over this year and next year.

“But the LNG business is fundamentally a long game involving very large capital investments. ExxonMobil remains bullish on the long-term future.

“Despite the new LNG capacity that is currently under construction or has taken FID (final investment decision), growing global demand and expected declining production from existing LNG facilities will result in a need for significant new supply capacity within the next decade.

“The average LNG project size delivers about 6 MTA (million tonnes per annum).  Assuming this stays constant, we will need about seven more projects to receive FID in order to meet growing demand through 2025. And these need to start happening now because LNG projects take around five years to build from FID to start-up.

“Over the next 25 years we will need more than 50 new LNG projects – or the equivalent of 20 new mega projects like Gorgon.”

Jeff said that developing these new gas projects to meet this demand was both an opportunity and a challenge. Cost competitiveness and delivering excellence in project execution will be key to determining who will succeed.

“LNG projects involve huge investments that bring tremendous economic value to gas-rich nations,” he said.

According to an independent analysis by ACIL Allen Consulting, the Gorgon Project alone is expected to add $400 billion to Australia’s GDP over its lifetime.

In its June Resources and Energy Quarterly, Australia’s Office of the Chief Economist said the value of Australia’s LNG exports was forecast to increase from an estimated $23 billion in 2016–17 to $37 billion in 2018–19. It said LNG was forecast to overtake metallurgical coal as Australia’s second largest resource and energy export in 2018–19.

Photo — Global LNG Supply & Demand Outlook

“However, the competition for the next wave of LNG projects is intense,” said Jeff. “There are many countries like Australia with abundant gas resources, including many aspiring exporters.

“As demand grows Australian exporters will face strong competition from suppliers in the United States, Canada, Qatar, PNG and Mozambique.”
Jeff said that advances in technology had been a key driver behind the tremendous growth in LNG trade.

“Dramatic improvements in the cost and efficiency across the supply chain from drilling to shipping have opened up opportunities for otherwise stranded gas resources around the world.

“ExxonMobil has been at the forefront of this progress and this continues today with the very latest improvement being the development of new LNG-specific, highly efficient gas turbines.”

Jeff said that successful LNG projects required collaboration and alignment across all stakeholders – producers, sellers, buyers, and, of course, governments.

“Strong, stable relationships are fundamental to successful LNG projects,” he said. “I mean, much more than simply contractual relationships. Only truly committed partnerships allow stakeholders to work through the many challenges that any complicated, 20-to-25 year project will entail.”

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