Australia’s liquefied natural gas (LNG) sector has been a significant contributor to the country’s finances since the first cargo of the super-chilled gas in liquid form left our shores in 1989.
The sector exported 77.7 million tonnes (Mt) of LNG during the 2020-21 financial year worth a total of $30.5bn.
This makes up a big part of the country’s total resource exports of $229bn during the same period, which in turn represented almost half of Australia’s total exports.
It also employs thousands of Australians both directly and indirectly, which further outlines its importance.
Despite this, the sector could be looking at a very real limit to its potential life with Woodside’s Scarborough field and Santos’ Barossa field, which are respectively expected to fuel Pluto Train 2 and restart the Darwin LNG project, likely to be amongst the last major offshore gas fields to be developed.
The future of the coal seam gas to LNG projects in Queensland is somewhat more nebulous, but that’s a tale for another day.
Australia’s last big offshore gas fields
So why does Got Gas think that Scarborough and Barossa might well mark the twilight years of the offshore gas-fuelled Australian LNG projects?
By any standard Scarborough is a gas field of significant size with estimated technically recoverable gas of 11.9 trillion cubic feet (Tcf) and the same is true of the somewhat smaller 4.5Tcf Barossa field, something that they will both need given their expected roles.
Scarborough is expected to start production in 2026, providing feedstock for the 5Mtpa Pluto Train 2 and 3Mtpa of LNG production from Pluto Train 1 for about 30 years.
Being smaller, Barossa will provide the Darwin LNG plant with enough gas to produce 3.7Mtpa of LNG for 25 years.
The question of course if there are other fields sitting in the sidelines after Scarborough and Barossa?
Woodside does have the major Browse gas field that has been mired in the environmental approvals process and faces potentially high capital costs and Sunrise, which is a great deal closer to Timor-Leste rather than Australia (and even then closer to Darwin rather than its operations in northwestern Australia).
Meanwhile, Santos has the Dorado oil and gas field that’s near Port Hedland and hardly suitable for feeding into Darwin LNG.
Beyond that, there’s a definite paucity of suitable gas fields and it might very well be too late to toss funds into exploration given that Scarborough was initially discovered in 1979 while Barossa was discovered in 2006.
There’s also no guarantee that existing LNG facilities will be refurbished or replaced beyond the lifespans of Scarborough and Barossa.
Environmental concerns
In addition to these factors, environmental concerns are likely to play a role in the future of LNG exports in Australia as well.
At Woodside’s recent annual general meeting – its 70th overall and the 35th since the first LNG cargo was exported, shareholders representing 58% of its issue shares voted against the company’s climate transition action plan.
While the result is non-binding, it is telling that the company’s shareholders think the company isn’t doing enough to help with the transition to net zero.
Criticism has been levelled against Woodside for its over reliance on carbon credits and not actual steps to reduce or eliminate emissions.
And while the company isn’t required to actually take any action, the vote is certainly an indication that it is on notice and could make it that much harder to justify further gas developments.
It certainly doesn’t help that three fields that make up Browse of CO2 contents of between 8% and 12% though Scarborough is very clean in comparison with CO2 content of just 0.5% and only really has to worry about emissions associated with producing LNG.
If that wasn’t bad enough, Santos’ Barossa has to deal with 18% CO2 content with the gas major considering carbon capture and storage to lower its emissions profile.
Australian LNG twilight?
While we certainly can’t rule out the potential that Woodside might just go ahead with Browse despite its challenges or for a new discovery to be made, the odds look to be against that and that we could be seeing the end of Australian LNG.
It will still be some time away. 25 to 30 years is more than a generation and takes many of us well into retirement, but it doesn’t take away that sense of finality.
However, it could also provide even greater impetus to plans to develop a new export commodity – namely green hydrogen, which has received greater attention than ever.