NS4960 Spring Term 2017 Australia: Energy Policy Oxford Analytica China Coal Trends Signal Deep Economic Shifts, April 2016

Overview Australia is a major energy suppler to Asia Major energy security concerns revolve around ensuring its energy export industry securing new markets in Asia Compared to much more interventionist Asian governments Australia relies on flexible and transparent energy market and private investment to ensure its energy security Australia exports two-thirds of its total energy output and is the world’s second largest coal exporter and the fifth largest exporter of LNG Country is also a major uranium exporter

Energy Balances I Coal production has doubled since 1990 Japan is typically the largest export market – takes around 40- 45% of Australia’s exports China, South Korea, and India are also important markets. Now Australia has to compete with rapidly rising coal exports from Indonesia Oil security presents a different picture Australian crude oil production peaked in 2000 and 800,000 bpd and has declined gradually since Demand has gradually risen Presently, Australia imports nearly half of its crude oil needs.

Energy Balances II Government maintains that oil security can rely on flexible global markets Critics have focused on rapidly declining domestic refining capacity and near total dependence on imported oil products in future Critics argue Australia needs to retain enough refining capacity to ensure product supplies in an emergency However government contends that a diversified products supply market and healthy regional refining system centered in Singapore can meet Australia’s oil product security needs.

LNG Boom I Australia has emerged as a major LNG producer with plans for major expansion Exports destined mainly for Japan, but also South Korea and China Country poised to surpass Qatar as the largest LNG exporter in the world Seven major LNG projects under construction with combined investments of $168 billion Seventy percent of the LNG projects under construction in the world in 2012 are in Australia

LNG Boom II Several Problems The Australia resource boom has been driving up the costs of Engineering services Labor Equipment and port services Chronic delays due to overloaded infrastructure and port congestion also taking a toll Resource boom has also driven up value of the Australian dollar Application has caused equipment and capital costs for projects to escalate dramatically

LNG Boom III Also Australian LNG will face strong competition for Asian markets from Potentially lower cost LNG projects in the U.S. and Canada from the shale boom Renewed export competition from Qatar New Russian supplies from Sakhalin West African supplies drawn by Asia’s LNG price premium Papua New Guinea LNG Potential East African offshore gas and Even possibly Alaskan LNG

LNG Boom IV Other Problems In China, Australian LNG will also have to compete with potentially much higher domestic conventional and shale gas production Other competition in China from as pipeline gas from Central Asia , Myanmar and possibly Russia’s East Siberia Japan’s LNG needs uncertain due to nuclear question Growing competition suggests LNG price trends over longer run are quite uncertain