Markets Visual Presentation M03: From export giant to import dependent: Australia’s paradoxical gas investment climate

Abstract

Markets Visual Presentation M03

This paper examines the paradoxical investment landscape of Australia’s oil and gas sector, where abundant resources and favourable market conditions coexist with a reluctance to invest. Despite being the world’s second-largest liquefied natural gas (LNG) exporter as of 2024, at approximately 82 mtpa, Australia faces the prospect of importing LNG to meet domestic demand. The country possesses an estimated 170 Tcf of discovered gas resources, yet nearly half remains undeveloped. The nation’s onshore domestic gas processing infrastructure, boasting a nameplate capacity of nearly 3900 million cubic feet per day (MMcfpd), operates at less than 50% utilisation – a figure projected to decline even as domestic gas shortages loom. These factors coupled with the high domestic gas prices should logically drive investment; however, Australia’s upstream sector continues to struggle. The paper explores the complex challenges deterring investment, including long-term demand and policy uncertainty, the ongoing era of monetary tightening, and a decline in financing for fossil fuel projects. Additionally, regulatory hurdles such as approval delays, updated decommissioning regulations that include trailing liabilities, environmental and legal challenges, and the safeguard mechanism further complicate the investment landscape. These factors tend to disproportionately affect smaller players, who lack the economies of scale to absorb additional overheads. This paper aims to analyse the complexities of Australia’s upstream investment climate and offer potential solutions. It draws on case studies from countries that have successfully navigated similar challenges and where companies, having found more favourable investment opportunities elsewhere, chose not to return.

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