Conventional gas and vast volumes of newly-discovered CBM, or 'coal seam gas' (CSG) as it is known in Australia, can underpin the majority of planned gas export schemes, boosting further Australia's position in the global LNG trade. Oil prospects are less encouraging, but the scale of likely gas exports should deliver substantial net energy receipts for decades to come.

Main trends and developments we highlight for Australia's Oil and Gas sector are:

CBM will increasingly contribute to the country's gas output, particularly in the east of the country. We expect overall gas production to have reached 90bcm by 2016, freeing up more than 52bcm of gas for export in the form of LNG, largely to Asian customers. By 2021, gas production should be above 122bcm and LNG exports could have reached almost 80bcm.

The controversial Australian Resources Super Profit Tax (RSPT) has been scrapped by Prime Minister Julia Gillard. This removes major uncertainties over the fiscal regime governing the mining and oil and gas sectors, and is a particular boon to the nascent CBM-LNG industry in Queensland. Instead of the RSPT, the existing petroleum resource rent tax (PRRT) that is applied to offshore oil and gas projects will be extended to cover the onshore as well, including the CBM-to-LNG sector. Upstream industry lobbyist the Australian Petroleum Production and Exploration Association (APPEA) has criticised the new tax.

Prime Minister Gillard has proposed a new carbon tax that would impose an initial cost of AUD23 per tonne of carbon emissions starting in 2012 and rise by 2.5% per annum before moving to a market-based scheme in 2015. The LNG industry has lobbied for exemption from the new carbon tax scheme.

According to the country's energy ministry, Australia is using oil three times faster than it is finding it. Oil import dependency is expected to increase to 78% within the next 10 years. Government forecasts suggest petroleum import dependency rose to 50% by 2010. We are assuming oil and gas liquids production averaging no more than 585,000b/d at its new peak in 2014, before declining to 512,000b/d by 2016.

By 2016, the crude oil import requirement is expected to rise to 490,000b/d, costing some US$16.7bn (assuming an average OPEC basket oil price of US$93.20/bbl). In 2011, we expect Australia to have imported an average 455,000b/d, at a cost of US$16.9bn using an OPEC oil price of US$101.90/bbl. Gas exports are forecast to rise towards 52bcm by 2016, bringing in potential LNG revenues of US$25.9bn. Potential net petroleum export proceeds for 2016 are therefore estimated at US$7.6bn, with the higher LNG exports helping to offset the rising oil imports.

At time of writing, we assume an OPEC basket oil price for 2011 of US$101.90 per barrel (bbl), falling to US$99.38/bbl in 2012. Global GDP in 2011 is forecast at 3.2%, down from 4.3% in 2010 reflecting slowing growth in China, a faltering recovery in the US and a worsening eurozone debt crisis. For 2012, growth is put at 3.6%.

Full Report Details: Australia Oil & Gas Report Q1 2012