An aerial image of Australia Pacific LNG.
An aerial image of Australia Pacific LNG.

LNG projects' profit 'relief' not enough to outweigh challenges

THE producers behind Gladstone's $70-billion LNG industry have had a glimpse of financial security, despite blowing out construction costs and running below full capacity.

The financial turnaround by the companies exporting LNG from the three Curtis Island plants was documented in respected industry analyst EnergyQuest's March report.

Chief executive Graeme Bethune said it would be a "relief" to the producers at Australia Pacific LNG, GLNG and QCLNG which generated positive cash flow due to rising LNG prices, production increases and by cost-cutting.

The report described Origin Energy's $230million in underlying earnings in the last six months of 2017 as a sharp turnaround.

The uptick in earnings was partly due to a major drive down in costs, including cutting 650 positions from its metro operations.

Despite the "positive" financial result, Mr Bethune said 2017 also highlighted the major challenges facing Gladstone's LNG exporters, including government policy.

In what was the first full calendar year of production for all six trains at the three projects, the 20.4million tonnes of LNG shipped meant exporters utilised 81 per cent of what they were capable of.

"Conversely, 19 per cent of capacity (is) equivalent to 4.8 MT or slightly more than one entire train," Mr Bethune said.

"By comparison, capacity utilisation at the established LNG projects on the west coast averaged 97 per cent."

EnergyQuest valued the 4.8MT at about US$5billion.

Mr Bethune said the projects would struggle to fill what was "one unused train" for a year because of promises made to stave off the Australian Government's domestic gas export restrictions.

He said overseas investors of Australian LNG projects "loathed" the government's export controls introduced last year, and warned of the "legal and reputational risks" of banning or restricting international exports.

The report warned more gas reserves would be needed for some of the three projects to fulfil promises to the domestic market.

With growing export from recently-constructed Western Australia projects and higher LNG prices, monthly export revenue could be close to $3 billion in early 2018.