PERTH (miningweekly.com) – Australia’s liquefied natural gas (LNG) sector has been urged to trim costs if it is to have a chance at participating in the second round of global LNG developments.

Energy economics group EnergyQuest said on Tuesday that while the country’s industry had a good record of moving quickly to seize market opportunities, it was losing its advantage as new gas market competitors emerged, most specifically in Russia.

“In the 10 years Russia has been negotiating last week’s massive pipeline gas deal with China, Australia has completed six LNG contracts with our big northern neighbour and the North West Shelf has been exporting to Guangdong since 2006,” EnergyQuest principal Graeme Bethune said.

“Unfortunately, however, Australia’s LNG speed has often come at the expense of good project execution with consequential higher costs - opening up opportunities for lower cost competitors like the US, East Africa, and now Russia,” Bethune said.

He warned that Australia could not afford to underestimate the significance of Russia entering the LNG arena, in its $400-billion gas deal. Under the Russia-China agreement, the 30-year gas deal would see gas supplies starting in 2018, and ramping up to 38-billion cubic meters a year.

“The negative impact for Australia’s LNG competitiveness and future market share from this new market dynamic is serious,” Bethune said.

“Russia has the world’s largest gas reserves and is the world’s largest exporter. This single contract has secured it a share of the world’s fastest growing gas market and laid the basis for its participation in further Pacific coast LNG projects.”

He noted that Australia’s LNG sector should be concerned as the project cost for Russia in its China supply deal is about the same cost as Australia’s Gorgon project - but with a capability to supply 80% more gas.

“This deal has the very real potential, therefore, to be a game changer in Australia’s key LNG market.

“To have any chance of seizing and participating in the next wave of LNG developments, Australia can no longer rely, therefore, on ‘being first in the queue’. Australia has to urgently cut costs and improve its LNG project execution, that is, learn to walk and chew gum at the same time.”