Business costs threaten LNG boom: oil boss

Business costs threaten LNG boom: oil boss

The Australian head of the world's largest petroleum company has warned that the soaring costs of doing business threaten the nation's much-anticipated liquefied natural gas (LNG) boom.

A suite of new LNG projects worth an estimated $180 billion is set to make Australian one of, if not, the world's largest LNG supplier.

Exxon Mobil Australia's chairman John Dashwood cited the explosion of unconventional shale gas production in the United States as something Australian investors should be worried about.

The dominant view of energy companies has been that the cost of getting the LNG from North America to Asia makes it too uneconomic to threaten Australia's projects.

The importance of those projects increases if the recent slowdown in iron ore and coal demand does not rebound soon.

"Whether that resources makes it to Asia depends on how it fares in the US," Mr Dashwood told a Melbourne business lunch on Thursday.

"But if you have a snapshot today it is said LNG could make it to Asia for less cost than you can from Australia's north-west shelf which we ought to be alarmed or worried about."

The discovery of massive gas finds off southeast Africa also threaten Australia's projects, with global companies such as Exxon Mobil still able to scale back and divert funds to Africa, he said.

Exxon Mobil has a share in the Gorgon and Papua New Guinea LNG projects, but is still considering the economics of the Scarborough field project off WA with partner BHP Billiton, including a possible floating plant.

A decision before the second half of 2013 was unlikely, Mr Dashwood said.

He said it was tough to attract investment in Australia because of high costs, including labour structure and shortages and other costs including the carbon tax.

"The most competitive wins," he said, adding Australia was still attractive because of its stable legal, fiscal and tax regimes. He was critical of bans on fracking to access natural gas in Victoria and NSW.

Expert engineers and geoscientists were being ignored while environmentalists running emotive arguments based on flawed assumptions were affecting policy, he said.

Opponents to fracking - or hydraulic fracturing - say the practice contaminates drinking water with chemicals and causes other hazards such as seismic activity.

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Tags business costsliquefied natural gas (LNG)

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