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be the world’s
problems and cost overruns are heavily impacting the
country’s four megaprojects: Gorgon, Ichthys, Prelude and
Wheatstone. For instance, Gorgon faces a halt in completion
because of problems bringing expanded production online,
and the engineering firm with the Ichthys project recently
pulled out of their contract due to cost overruns.
These setbacks will have a huge effect on returns on
investment. In fact, it is estimated that the projects will
receive an internal rate of return of less than eight percent.
Additionally, these setbacks will have heavy market impacts.
According to Reuters, this means “a tighter market than
initially expected, and prices have already reacted. The Asian
spot LNG price almost doubled between June last year and
January 2017 to more than $9 per million British thermal units
(mmBtu), its highest since 2014.”
The setbacks will, however, benefit other suppliers of LNG,
such as the seven U.S. export projects that are currently
approved. Producers in Australia have even found themselves
purchasing supplies from competitors to fulfill their supply
commitments. Despite this, Australia still aims to be the
world's biggest LNG exporter—just at a much slower pace.
Delays in Australia’s LNG Megaprojects