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Australia Oil and Gas Market - Growth, Trends, COVID-19 Impact, and Forecasts (2021 - 2026)

Australia Oil and Gas Market - Growth, Trends, COVID-19 Impact, and Forecasts (2021 - 2026)

  • September 2021
  • 161 pages
  • ID: 6155666
  • Format: PDF
  • Mordor Intelligence LLP

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The Australia Oil and Gas Market is expected to grow at a CAGR of around 3% over the forecast period of 2021-2026. The COVID-19 outbreak has negatively impacted the oil and gas operation in the country owing to the lower prices in the global market and the sudden decline of demand globally. The planned investments in the upstream and midstream sectors, especially in gas (LNG) in the past decade led Australia to be the largest LNG exporter globally in 2020. However, the country’s shift toward renewable energy, dropping refining capacity and closure of crude oil refinery in Australia, is expected to restrain the market during the forecast period.

Key Highlights
The country is one of the key oil and gas producers in the Asia-Pacific region, with oil and gas production reaching 2.4 thousand million barrels and 2.4 trillion cubic meters, respectively, in 2020. The country’s remaining contingent resources that are yet to be commercially recoverable are estimated at over 2,210 million barrels of oil and gas.
Australia has about 0.3% of the world’s oil reserves. Most of known remaining oil resources in the country are condensate and liquefied petroleum gas (LPG) associated with giant offshore gas fields in the Browse, Carnarvon and Bonaparte basins. In addition, oil resources are identified in the Perth, Canning, Amadeus, Cooper/Eromanga, Bowen/Surat, Otway, Bass, and Gippsland basins.
Australia was the largest exporter of LNG , globally, in 2020. Australia exported 77.2 million ton of LNG during the past 12 months, ended on June 30, 2021. The major importers of LNG from the Australian market, for FY 2021 ended in June 2021, were China (29.8 million ton), Japan (28 million ton), and South Korea (8 million ton).

Key Market Trends

Increasing Demand of Natural Gas Related Infrastructure

For several years, natural gas has witnessed significant growth in Australia’s production and consumption due to the country’s shift from coal to natural gas as a primary energy source for cleaner energy. In 2020, the total natural gas production of Australia was 142.5 billion cubic meters (bcm), which rose from 52.6 bcm in 2010, and the country’s total gas consumption reached 40.9 bcm in 2020 compared to the 31.7 bcm in 2010, recording a 29% growth rate of gas consumption between 2010-2020.
The increasing exploration and production of natural gas reserves are mainly driven by the rise in the industrial demand from refining, petrochemical, special chemical, and fertilizer industries. Additionally, secure storage helps the industry to manage seasonal variations in demand and enhances energy security.
During 2019–20, Australia had recorded an AUD 27.9 billion surplus in oil and gas trade, the highest surplus since 1990. It is primarily due to AUD 47.5 billion worth of LNG exports. Further, Australia has become the world’s largest LNG exporter with a total LNG export of 106.2 bcm in 2020, followed by Qatar with 106.1 bcm of LNG export.
Further as part of Australia’s gas-fired recovery, the government has also committed to boosting the entire supply chain’s east coast gas market. With this, the government will put its efforts through the three key areas: unlocking supply, delivering an efficient pipeline and transportation market, and empowering gas customers. Therefore, it is expected to increase the market for gas-based infrastructure in the country.

Dropping Refining Capacity and Closure of Crude Oil Refinery in Australia is a Threat to Downstream

In 2020, the total refining capacity of Australia was about 456 thousand barrels per day (KBPD) compared to 740 KBPD a decade ago in 2010. The has marked a 38% decline in Australia’s total refining capacity. The continuous fall in the refining capacity is likely to be due to the declining domestic crude oil production and insufficient future capital investments that impact profits. Some of the refineries in Australia are finding low demand and saw uneconomical margins.
Furthermore, the refineries import most of their crude and are majorly transported from long distances. This high crude delivery cost will make them disadvantaged compared to the US Gulf coast or Middle Eastern refiners with a readily available supply of cheap local crude accessible via pipeline.
Additionally, there is also the high cost of the crude slate. As relatively simple refineries in Australia, they purchase lighter, sweet crude, which comes at a premium to heavier sour crudes. With, this the refineries will also be forced to spend money to upgrade their processing in the upcoming years to meet new standards in gasoline for the Australian market. In addition, operating expenses are also relatively high due to the lack of large economies of scale and comparatively high labor costs.
The federal government of Prime Minister Scott Morrison announced AUD 2.3 billion slush fund for the oil refining corporations in last year’s budget as part of a plan to boost Australia’s limited storage capacity. It included money for the construction of 780 ML (4.9 million barrels) of diesel storage tanks. The additional oil refining subsidies proved insufficient for Exxon Mobil. With this, there will be only two remaining refineries in Australia, Ampol in Lytton, Queensland, and Viva Energy in Geelong, Victoria. Mass layoffs and closures are threatened at both facilities.

Competitive Landscape

The Australia oil and gas market is moderately fragmented. Some of the major companies include Royal Dutch Shell PLC, TotalEnergies SE, Chevron Corporation, Exxon Mobil Corporation, BP PLCand others.

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