Australian LNG Projects to Face ‘Serious Challenges’

Australia’s liquefied natural gas industry faces “serious challenges” such as labor shortages that may force energy companies to delay, merge or cancel their projects, Moody’s Investors Service said.

Moody’s cited Woodside Petroleum Ltd.’s announcement on Nov. 30 that its Pluto LNG venture would cost A$900 million ($889 million) more and start about six months later than previously forecast. The increased cost “is symptomatic of Australia’s resource boom,” Saranga Ranasinghe and Ian Lewis, analysts at Moody’s, wrote in a report dated yesterday.

“While credit negative for Woodside, the cost overruns at Pluto also hold negative implications for the rest of Australia’s energy industry,” and its A$150 billion of proposed investments, the Sydney-based Moody’s analysts said.

Woodside, Chevron Corp., BG Group Plc, Santos Ltd., Royal Dutch Shell Plc and ConocoPhillips are among energy producers facing a contest for skilled workers and customers as they advance with Australian LNG ventures targeting Asian demand. The Australian Petroleum Production & Exploration Association has estimated the nation has A$200 billion of LNG and coal seam gas projects planned.

“These are serious challenges,” the report said. “While we have a favorable view of the long-term LNG demand, these operating challenges will mean that some of Australia’s planned LNG projects will not proceed as currently anticipated. Whether that will lead to the merger of some projects, or to their outright cancellation, remains to be seen,” it said.

To contact the reporter on this story: James Paton in Sydney at jpaton4@bloomberg.net

To contact the editor responsible for this story: Amit Prakash at aprakash1@bloomberg.net.

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