Interesting article, with implications for Alaska LNG. The $80/bbl price assumes that Asian LNG prices remain linked to oil. Given the growth of shale gas, that may be an aggressive assumption. If gas and oil prices became delinked, the risk associated with an LNG project becomes even greater.
Singapore (Platts)–16Feb2011/650 am EST/1150 GMT
New Australian LNG projects are likely to cost $3,000 per mt per year of capacity, and will require a real oil price of $80/barrel in order to generate a marginal return on capital, analysts at Bernstein Research said in a note published Wednesday.
LNG project costs had trebled over the past decade, the analysts said, “eroding much of the upside for investors.” “Given high costs, we expect LNG pricing to remain firmly oil linked,” they added.
“Darwin LNG project developed in the early part of last decade was less than $1000/mt, while Pluto LNG and Gorgon LNG are close to $3,000/mt,” they said.
The increase was due to three things: higher upstream costs, an increase in costs for liquefaction plants from $400/mt to $1,000/mt of capacity, and a doubling in the value of the Australian dollar against the US dollar. … more