LNG boom to make Australia 'Middle East of gas'

Google/AFP, By Neil Sands (AFP)

MELBOURNE — Australia is poised to become "the Middle East of gas" as Asia's rapidly growing economies queue up to buy its vast reserves in liquid form, according to analysts.

The government last week approved the massive Gorgon liquefied natural gas (LNG) project off Western Australia, which Prime Minister Kevin Rudd said would cost 50 billion dollars (41 billion US) to build and would generate 6,000 jobs.

The joint venture by Chevron, Shell and ExxonMobil is already underpinned by supply contracts with China and India worth more than 60 billion US dollars, and more customers are likely to sign up before it begins operating in 2014.

Gorgon is just one of a clutch of LNG projects planned in the next decade that analysts say will pump tens of billions of dollars into the economy and see Australia challenge Qatar as the world's major gas exporter.

Hailing Gorgon's 41 billion US supply contract with PetroChina this month -- the largest trade deal in Australian history -- the government said LNG was an important part of the country's future prosperity.

"This unprecedented export deal confirms Australia?s importance as a global energy superpower supplying vital clean energy resources and technologies to China and our other Asia-Pacific trading partners," Resources Minister Martin Ferguson said.

Asian demand for coal and iron ore have helped Australia's economy avoid recession during the global downturn but State One Stockbroking analyst Peter Kopetz said LNG was the next boom commodity.

The gas is liquefied for shipping abroad, where it is turned back into gas and distributed via pipeline.

"The numbers are phenomenal. When you look at them it's mind-boggling," he said. "It's going to be LNG boom times."

Australia exported 15.2 million tonnes of LNG worth 5.2 billion dollars in 2006, a figure the government estimates will quadruple to 60 million tonnes by 2015 if all currently planned projects proceed.

"Potentially, there could be many more projects coming on board," Kopetz said, pointing out that new discoveries were being made all the time.

He said Australia had the potential to become "the Middle East of gas" in coming decades as the world's oil supplies dwindled.

"Have a look at the Middle East, how they've benefited over the past 50-60 years from the oil boom," he said.

Western Australia is the centre of the LNG boom with three huge gas fields off its northwest coast: the Carnarvon, Browse and Bonaparte basins.

But Kopetz also points out that Queensland state on the east coast has significant reserves of coal seam gas (CSG), naturally occurring methane trapped by water deep underground that can be converted to LNG.

Shell plans a CSG plant in Queensland expected to produce up to 16 million tonnes of LNG a year, with other energy giants such as Britain's BG Group, ConocoPhillips, and Malaysia's Petronas also developing projects in the area.

Despite the proliferation of LNG schemes, EL&C Baillieu head of research Ivor Ries said there was sufficient demand from Asia.

He said existing LNG fields in Malaysia and Indonesia were coming to the end of their operational life, creating a market for Australian gas.

Asian buyers were also keen to source gas from Australia rather than outside the region because it offered a secure supply, Ries said.

"If you're in Asia, you don't have to route your ships through a war zone, which is the Middle East, and the distance is shorter," he said.

However, not everyone is happy about Australia's rush to exploit its LNG reserves, with green groups raising concerns that environmental factors are being neglected.

Environment Minister Peter Garrett has conceded Gorgon is "greenhouse-gas intensive" and could raise national emissions by up to one percent if ambitious plans to pump carbon dioxide emissions into the seabed fail.

But while Garrett included 28 conditions in his Gorgon approval designed to protect the environment, Ries said the government was determined to develop LNG resources.

He said the industry had the potential to overtake coal as the country's most valuable export, generating jobs, boosting the economy and filling government coffers with tens of billions of dollars in tax revenue.

"The tax figures are quite exciting for government. If all these projects go ahead, Canberra and the states of Queensland and Western Australia would be awash with cash," he said.

GM power has shifted to China

Foreign operations report to Shanghai

Freep.com, by MARCIN SZCZEPANSKI AND TIM HIGGINS, FREE PRESS BUSINESS WRITERS

SHANGHAI -- Largely overlooked in last month's sweeping management reorganization of the new post-bankruptcy General Motors Co. was a recentering of power to Shanghai.

Nick Reilly went from overseeing GM's Asia operations based in Shanghai to overseeing all of the automaker's operations outside of North America, except for Opel -- ending decades of bureaucratic silos that had carved up the globe into regional divisions.

So while GM's Canada and Mexico operations report through the United States, most of the rest of the world reports through China.

"It should signal to everybody that certainly North America is going to be important to righting the ship, but basically the bread is going to be buttered out of Asia," said Michael Robinet, vice president of global vehicle forecasts at CSM Worldwide. "GM fully understands that, and that's the reason why they put more decision-making capability out of Asia for their future fortunes."

As GM looks to sell off majority control of its Opel division in Europe, the Detroit automaker will likely draw on lessons from its China operations, where it is partnered with Shanghai Automotive Industry Corp. and Wuling Motors, for managing its new relationship.

GM is working with the German government in what's become an increasingly messy process to find a majority owner for Opel. Among the potential partners: Magna and a Russian bank or Belgium-based investment company RHJ International SA.

GM has learned much from its Chinese partners.

"We are familiar with operating in a shared ownership environment, which is quite different than what I call a 'command-and-control environment,' " Kevin Wale, president of GM China, told the Free Press during a recent interview. "You have to communicate very well. You have to understand that both sides of a partnership have to win all of the time."

That communication requires time.

"We often say that we make the same decision four or five times," Wale said. "But you have to do that to make sure everyone is lined up and that people aren't working against each other."

Shining jewel

While GM sales in the United States are down 37.7% to 1.1 million so far this year, its sales in China are growing at an astonishing rate.

GM's July sales in China through its joint ventures increased 77.7% to 144,593, which the company says makes it the best July ever in its books. For the first seven months of the year, GM's China sales were up 42.8% to 959,035, according to GM.

In early August, GM celebrated the sale of its 1 millionth vehicle in China this year -- a man named Ye Banjun purchased a silver Buick LaCrosse -- with a giant cake.

"Asia is the shining jewel that they have," George Magliano, an industry expert at IHS Global Insight, said of GM.

"If you look at GM going forward, they are a smaller company, they are more refocused. If they turn themselves around and they have resources ... to put behind things, it's going to be China and Asia."

Low-end stimulus

Some of GM's success in China this year, Wale said, is credited to the Chinese government's stimulus aimed at attracting lower-income, rural shoppers to new cars.

"The government has been very active in promoting low-end consumption of vehicles," he said.

This has helped GM's Wuling venture, which saw sales jump 90.7% to 87,925 in July compared with last year. That growth is driven largely by the Wuling Sunshine minivan.

GM recently announced a new deal with its Chinese partners to export Wuling mini-commercial vehicles from China to South America, the Middle East and North America.

GM also looks poised to enter into a venture with China FAW Group Corp., China's second-biggest automaker, to make light trucks, Bloomberg News reported last week.

"So far, China's growth has exceeded anything anybody thought possible," Mike DiGiovanni, GM's executive director of global market and industry analysis, said in July.

And for GM, said Magliano, Shanghai is "the crown jewel in the new empire."

Free Press business writer Jewel Gopwani contributed to this report.

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