WPL Woodside Petroleum Limited

By Robb M. Stewart

MELBOURNE, Australia--Australia's gas-export industry benefits from its proximity to energy-hungry Asian markets but its advantage could be dulled if it doesn't increase collaboration and consider sharing infrastructure and technology, an executive at Chevron Corp. (CVX) cautioned.

Although liquefied natural gas exports have boomed in recent years after the construction of billion-dollar production operations around Australia, Nigel Hearne, president of Asia-Pacific exploration and production at Chevron, said there was too much investment and very little shared infrastructure. There is also a shortfall of affordable and reliable domestic gas supply in the country, he said.

"We have to break the paradigm so we're not competing in-country," Mr. Hearne said in an interview with The Wall Street Journal. "We're competing with other countries that are after the same markets that Australia is, such as Qatar and Russia and North America."

Growing demand for energy and cleaner-burning fuels such as natural gas are expected to keep Asia at the heart of the LNG industry's growth. Yet gas from rivals basins in the U.S. and elsewhere are getting more efficient and lowering costs, heightening competition with Australian fuel.

Mr. Hearne said that unlike in Australia, the North American natural gas system is interconnected and cargoes of LNG are already moving from the Gulf Coast to Asia, and there is likely be a time when gas from Appalachian shale also finds its way to Asia.

Australia has significant resources and companies have sunk significant investment in the infrastructure that cools gas to a liquid so it can be shipped, but the country needs to ensure costs remain low and the price of LNG that lands in Asia remains competitive.

"We've not yet demonstrated the ability to collaborate as we should have, and I think if we focus on competing outside of Australia it really will be the collaborating that will create an interconnected basin that will lower our development costs," Mr. Hearne said.

He pointed to the North Sea and Gulf of Mexico as examples of where industry has successfully shared infrastructure, helping oil fields develop and ensure facilities work at capacity and costs are held down. He added the time for an interconnected basin in Australia, rather than separate LNG and domestic gas industries, is now ahead of the next wave of expected investment in LNG. "We haven't done it to date, but there's no reason why this should stop us," he said.

Mr. Hearne welcomed proposals by several companies to build LNG import facilities in eastern Australia to add volumes of domestic gas and shore up the local power industry, and suggested that Australian LNG operations approach the liquefaction of natural gas as a service rather than bespoke capital investments that could strand resources.

"I think things will naturally evolve," Mr. Hearne said, adding Australia can maintain its advantage over other exporters if it can keep existing LNG infrastructure full. That begins by looking at the market rather than the sources of production, working together and considering an integrated gas system in Australia.

Write to Robb M. Stewart at robb.stewart@wsj.com

(END) Dow Jones Newswires

May 26, 2019 22:47 ET (02:47 GMT)

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