US shale gas may become export rival to Australia

US shale gas may become export rival to Australia

May 20, 2013, Peter Ker

Fears that the US could become a gas export rival to Australia are firming, after the Obama administration approved more liquefied natural gas exports at the weekend.

In a positive indicator for BHP Billiton’s petroleum business, the US Department of Energy gave conditional approval for the Freeport LNG project in Texas to export to nations that do not have a free trade agreement with the US.

The US has traditionally been reluctant to allow energy exports, given the nation has needed imports to meet its energy needs, but the recent shale boom has created a gas glut that has allowed the nation to consider more exports.While the approval relates to just one LNG project, it is seen as an important indicator for how the US government will judge close to 20 other applications to export LNG.

BHP could benefit from relaxed export rules after buying $20 billion worth of shale acreage in the US in 2011. Because of the gas glut, BHP wrote down a record $US2.84 billion on those purchases in 2012, but a freer attitude towards exports could rebalance supply and demand across the sector.

In November, BHP said it was ”studying” the viability of exporting gas from the US, and last month BHP chairman Jac Nasser called for more exports out of the US. He said: ”They should encourage the export of their onshore oil and gas, because that will have geopolitical benefits around the world, apart from the fact that it would create a lot of very highly skilled jobs.”

But the emergence of the US as a supplier to gas-hungry nations such as Japan and Korea could threaten the chances of more gas projects being approved in Australia, where billions are being spent on projects in Queensland, Western Australia and the Northern Territory.

British bank Barclays recently predicted the US could be exporting as much gas as Australia within 12 years if the relaxation of export rules continued as expected.

Australian gas projects are considered among the world’s most expensive to build, and increased competition from low-cost producers in the US will only make it harder for Australian projects to get off the ground.

Excessive costs have already been cited as the reason for Woodside Petroleum to reject plans to build a big gas hub at James Price Point near Broome.

The Freeport LNG project boasts Dow Chemical and Japanese power companies among its owners, and will require a further approval from the US Federal Energy Regulatory Commission before it goes ahead.

The news comes just days after new BHP chief executive Andrew Mackenzie announced that his cost-cutting drive would include cuts to the amount of annual capital spending on the US shale business.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (, the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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