Asian companies will seek to take majority stakes in Australian liquefied natural gas projects within five years, KPMG Asia Pacific energy head Mina Sekiguchi says.
Ms Sekiguchi, KPMG’s Tokyo-based head of energy and natural resources in Asia Pacific, said Asian utilities, trading houses and national oil companies, particularly from Japan, were enthusiastic about using their minority positions as platforms for further investment and potential acquisitions.
“Some are looking to be operators or take bigger stakes and they think taking these minority stakes is a good way to learn,” she said. “In probably five years time once construction ends and we start shipping I think it could trigger the next phase where Japan will get more involved in these projects.
“Some of the projects might be sold because they might not be profitable enough around these prices for current shareholders but that means they will be picked up by somebody else, a new entrant maybe from Japan, China, Indonesia, Malaysia or Korea, for example. That has started happening and there will be a lot more transactions.”
Japanese investment has been important in the rapid expansion of Australia’s LNG capacity. Japanese utilities have taken minority positions in the majority of Australian LNG projects in operation or under construction. The $34 billion Ichthys project near Darwin, headed by Japan’s INPEX and scheduled to start production in late-2016, will be the first Japanese-operated LNG project anywhere in the world.
But Singapore-based Tri-Zen International principal consultant Tony Regan said he doesn’t believe greater Asian involvement in Australian projects is likely.
“It’s not the time to be doing something that doesn’t seem to be satisfying any strategic objective,” Mr Regan said. “To increase your stake in a liquefaction plant or the upstream supply into it would be hugely expensive. If anything I think you could make the case of them selling those stakes as they are not getting any benefit from them.”
Mr Regan said taking on operatorship was especially unlikely considering the relative inexperience of many of the companies in question.
“It would be a huge jump for many of these companies to take over the operator ship of an LNG plant because they just don’t have the expertise,” he said.
“And in terms of majority positions, it would be hugely expensive to do this and if the economics of these projects are looking a bit dodgy they are coming into them at exactly the wrong time and could end up having to show a loss on their investment. We are talking billions of dollars to get a significant stake and I really don’t see any appetite to do that.”
But Ms Sekiguchi said the appetite was there as long as there was opportunity for “expertise transfer”.
“One of the things that is a challenge for a lot of Asian countries is they have never been an operator or a majority investor so in order to be active, and not just a minority investor, they have to learn a lot,” she said.
“That makes their relationship with Australia very important.”
The biggest benefit to the region would be energy security, Ms Sekiguchi said, as Australia is widely regarded as one of the most reliable LNG suppliers, underpinned by political stability.
“When I talk to my colleagues across Asia, everyone is having energy security challenges and LNG to some extent will provide an answer to those challenges,” she said. “It is a good solution available to them. They all want to diversify supply and Australia is key for this.”
The Fukushima nuclear disaster had forced the Japanese government to seek alternative energy sources, Ms Sekiguchi said. But if nuclear reactors were restarted, it would be in “better balance” with other energy sources and would be unlikely to impact demand for LNG.
“After Fukishima we have been working very hard as a nation to increase our national security, not just because we lost nuclear but because it is very important to diversify and lower the high dependency on one thing or place.”