An overview of Australia’s liquefied natural gas (LNG) industry

Australia is one of the world's largest exporters of liquefied natural gas (LNG), with ten projects currently operating across Queensland, Western Australia and the Northern Territory.

These projects are export-focused and closely link Australia’s gas industry with the energy systems of multiple countries, particularly in Asia. These countries often have little or no domestic gas production and have turned to Australian LNG as a reliable means to of generating power and transitioning away from more carbon-intensive fuels such as coal.

Despite the prominent role the LNG now occupies in Australia’s economy, the projects it consists of are for the most part relatively new. Nine of the ten LNG projects currently operating shipped their first cargoes after 2000 and, of those, eight after 2010. However in that time the industry has attracted more than A$250 billion in investment.

Article content

1. What is LNG?
2. Joint ventures and SPAs
3. Industry overview
   1. Queensland
   2. Western Australia
   3. Northern Territory
4. Key points

Australian LNG Projects at a Glance

What is LNG? 

LNG is natural gas that has been condensed into a liquid through a cooling process that brings it to approximately -162°C. In its liquefied form, natural gas occupies around 1/600th of its original volume, making it far more economical to transport over long distances by ship.

The LNG production process begins with the extraction of natural gas from underground reservoirs. In Australia, this gas is sourced either from conventional offshore gas fields in Western Australia and the Northern Territory or from coal seam gas (CSG) fields in Queensland. The gas is processed to remove water, carbon dioxide, hydrogen sulphide and other impurities and then passed through refrigeration systems that progressively reduce its temperature until it becomes a liquid. The resulting LNG is stored in large, insulated tanks before being loaded onto specialised LNG carriers for export.

Once it has reached its destination, the LNG is unloaded into storage tanks and typically warmed back into a gaseous state by passing through regasification facilities. The gas is then transported through pipelines for use in electricity generation, industrial processes, commercial applications and residential heating.

Joint ventures and SPAs 

LNG projects are among the world’s most expensive industrial developments and therefore require solid financial footing before being approved and developed. In Australia this has typically been achieved through two, often connected, commercial arrangements: joint ventures and Sale and Purchase Agreements (SPAs).

The first instrument, joint ventures, are a logical method for sharing the risk of funding projects that cost tens of billions of dollars. In the case of Australian LNG projects these joint ventures often involve an operator – usually a local gas producer – as well as several international companies. In addition to sharing the profits from their operations, the joint venture partners can benefit from other, often complex, commercial arrangements. One specific arrangement is particularly visible in Australia’s industry - the SPA.

An SPA allows a company to formally secure future supply (often for periods of 15 to 20 years at a price based on confidential calculations). These agreements are useful instruments for LNG projects as they allow proponents to access additional project funding (such as loans from banks) on the basis that they can prove where future revenue will come from.

Joint venture partnerships and SPAs are sometimes combined in Australia’s LNG industry, with certain joint venture partners also committing to receiving LNG SPAs. That is partially why the list of partners in Australian LNG joint ventures includes international electricity utilities, gas companies and trading houses. In Queensland these arrangements are sometimes referred to as ‘foundational contracts’ as they underpin financing and final investment decisions.

Industry overview 

Queensland 

Queensland's LNG industry differs from the rest of Australia because it is supplied primarily by coal seam gas (CSG) from the Surat and Bowen basins rather than conventional offshore gas fields.

Three LNG export projects were developed on Curtis Island near Gladstone and launched between 2014 and 2016: Australia Pacific LNG (APLNG), Gladstone LNG (GLNG) and Queensland Curtis LNG (QCLNG). Together, these projects transformed Queensland into a major LNG exporting region and linked eastern Australia's domestic gas market to international gas markets.

The vast upstream development associated with Queensland’s LNG industry also fundamentally changed the production balance in the East Coast Gas System. While historically the Southern States were responsible for the majority of gas production, Queensland rapidly assumed the role of dominant producer after CSG production started.

Australia Pacific LNG (APLNG)

APLNG shipped its first LNG cargo in January 2016 and is Australia's largest CSG-to-LNG project. It is a joint venture between ConocoPhillips (47.5%), Origin Energy (27.5%), Sinopec (25.0%) and is estimated to have cost ~A$24 billion to develop.

APLNG was developed around a foundational LNG supply agreements with Sinopec, one of China's largest energy companies, as well as Japanese customers Kansai Electric and JERA.

APLNG is one of Australia’s largest gas producers, with joint venture partner Origin Energy operating the substantial CSG fields in the Surat and Bowen Basins that supply the project with gas for liquefaction.

Gladstone LNG (GLNG)

GLNG commenced exports in 2015. It is a joint venture that is operated by Santos (30.0%) and which includes Malaysia’s PETRONAS (27.5%), France’s TotalEnergies (27.5%) and the Korea Gas Corporation (KOGAS) (15.0%) as partners. It is estimated to have cost A$18 billion to develop.

The commercial background of the GLNG project is unique due to the fact it was approved before sufficient dedicated reserves (CSG reserves in Queensland) were secured. This, as well as other operational realities, means that Santos frequently turns to the domestic market to purchase third-party gas to meet its contractual export obligations.

Queensland Curtis LNG (QCLNG)

QCLNG shipped Australia's first cargo of LNG produced entirely from coal seam gas in December 2014, after a development costing approximately A$20 billion. It is a joint venture operated by Shell through its subsidiary Shell QGC (73.75%), with China National Offshore Oil Corporation (CNOOC) (25.0%) and MidOcean Energy (1.25%) as joint venture partners.

QCLNG was originally developed by BG Group before becoming part of Shell's portfolio following Shell's acquisition of BG Group in 2016. The project is underpinned by long-term LNG sales agreements with its Chinese and Japanese joint venture partners.

Western Australia 

Western Australia's LNG industry differs from Queensland's because it is supplied almost entirely by conventional offshore gas fields located off the state's north-west coast rather than onshore coal seam gas resources.

Five LNG export projects have been developed across the Pilbara and Kimberley regions since 1989: the North West Shelf Project, Pluto LNG, Gorgon LNG, Wheatstone LNG and Prelude FLNG. Together, these projects have established Western Australia as Australia's largest LNG-producing region and one of the world's most significant LNG export hubs, supplying customers throughout Asia and beyond.

The development of Western Australia's LNG industry was underpinned by some of the largest resource investments in Australian history and the commercialisation of vast offshore gas resources in the Carnarvon and Browse basins. Unlike Queensland's LNG industry, which was built around a large-scale expansion of onshore gas production and domestic market integration, Western Australia's projects were primarily developed as export-oriented ventures linked to long-term international LNG contracts.

Gorgon LNG

Gorgon is one of the world's largest LNG projects and the largest single resource project in Australia's history. The project is located on Barrow Island off the Pilbara coast and shipped first cargo in 2016. The project cost approximately A$54 billion to develop and was a joint venture of six companies: Chevron (operator; 47.3%), ExxonMobil (25%), Shell (25%), Osaka Gas (1.25%), MidOcean Energy (1%), JERA (0.417%).

The project includes one of the world's largest carbon capture and storage (CCS) facilities. The CCS project is designed to inject naturally occurring carbon dioxide removed from the Gorgon gas stream into a deep underground saline reservoir. Since commencing operation in 2019, the facility has experienced technical issues and fallen short of its original storage targets.

North West Shelf LNG

The North West Shelf Project established Australia’s LNG industry, shipping the country’s first cargo in 1989. The original LNG venture has historically been held by Woodside (operator; 33.3%), BP (16.7%), Chevron (16.7%), Shell (16.7%) and the Mitsubishi/Mitsui joint venture (16.7%) but the project now operates through several associated ventures and ownership arrangements.

The multi-phase project has been developed across several decades, with more than A$35 billion estimated to have been spent and over 6500 cargoes shipped. It is Australia’s largest resources project (not single resource, a moniker which belongs to Gorgon).

The North West Shelf was built around long-term Japanese utility contracts – though it now sells to customers in China, Spain, South Korea, and the United States – and became the template for many future Australian LNG developments.

Wheatstone LNG

Wheatstone LNG commenced exports in 2017 from Onslow in Western Australia. It is a joint venture operated by Chevron (64.1%) and includes Kuwait Foreign Petroleum Exploration Company (KUFPEC) (13.4%), Woodside Energy (13.0%), PE Wheatstone (8.0%) and Kyushu Electric (1.46%) as partners. The project is estimated to have cost approximately A$34 billion to develop.

Wheatstone was developed around long-term LNG sales agreements with customers in Japan and South Korea and is supplied primarily by the Wheatstone and Iago offshore gas fields. In addition to exporting LNG, the project also supplies gas to the Western Australian domestic market through dedicated domestic gas infrastructure.

Prelude floating liquefied natural gas (FLNG)

Prelude FLNG shipped its first LNG cargo in 2019 and is the world's first large-scale floating LNG facility. It is a joint venture operated by Shell (67.5%) and includes Japan’s INPEX (17.5%), KOGAS (10.0%) and CPC Corporation Taiwan (5.0%) as partners. The project is estimated to have cost at least US$17 billion to develop.

Unlike conventional LNG projects, Prelude processes and liquefies gas directly offshore aboard a floating facility located above the gas field. The project was designed to commercialise offshore gas resources that may not have been economic to develop using traditional onshore LNG infrastructure, although it has experienced several operational interruptions since commencing production.

Pluto LNG

Pluto LNG commenced exports in 2012 and was the first of the ‘new generation’ of Australian LNG projects to begin production. It is operated by Woodside (90.0%) with Japan’s Kansai Electric 5% and US-based MidOcean Energy 5% as joint venture partners. The original Pluto LNG development is estimated to have cost approximately A$15 billion.

The project, which is located on the Burrup Peninsula near Karratha, was initially developed around gas from the Pluto gas field located offshore Western Australia. Pluto is now undergoing a major expansion through the construction of Pluto Train 2, which will process gas from Woodside’s Scarborough gas field and thereby significantly increase the facility's export capacity.

Northern Territory 

Two LNG projects have been constructed in the Northern Territory: Darwin LNG and Ichthys LNG. As in Western Australia, both of the projects are supplied with gas from offshore operations and primarily ship their cargoes to customers across Asia.

The development of an onshore gas industry in the Northern Territory an new element to the industry. Tamboran Resources has stated it aims to develop a new project – Northern Territory LNG – that will source gas from holdings in the Beetaloo Basin, and they have also signed an MOU with Santos to explore the possibility of expanding Darwin LNG to process gas from the basin.

Ichthys LNG

Ichthys LNG shipped its first cargo in 2018 and is one of Australia's largest and most complex LNG developments. It is a joint venture operated by INPEX (67.82%) and including TotalEnergies (26%), CPC (2.625%), Osaka Gas (1.2%), Kansai (1.2%), JERA (0.735%), Toho Gas (0.42%). The project is estimated to have cost approximately US$45 billion to develop.

Gas is produced from the Ichthys field in the Browse Basin and transported almost 900 kilometres via subsea pipeline to processing facilities near Darwin. The project was primarily developed to supply Japanese energy customers under long-term LNG contracts.

Darwin LNG

Darwin LNG commenced exports in 2006 and was Australia's second LNG export project after the North West Shelf. It is currently a joint venture operated by Santos (43.4%), though prior to a sale in 2020 ConocoPhillips was the operator, and includes SK (25%), INPEX (11.4%), ENI (11%), JERA (6.13%), Tokyo Gas (3.07%) as partners. The original project is estimated to have cost approximately US$3.2 billion to develop.

The facility was developed to process gas from the Bayu-Undan field in the Timor Sea and was originally scheduled to close in 2022 given the field’s declining production (production officially ceased in 2023). However, Santos has extended the life of the project by connecting it with their offshore Barossa gas project, which is expected to run for up to 25 years. 

Key points 

• Australia’s LNG industry includes ten projects located in Queensland, Western Australia and the Northern Territory. The projects can be roughly sorted into two groups: the ‘older generation’ projects including North West Shelf LNG (1989) and arguably Darwin LNG (2006), and the eight new generation projects (2012 - 2019).
• There are broadly two types of gas operations supplying Australia’s LNG projects: onshore CSG operations in Queensland and offshore conventional gas operations in Western Australia and the Northern Territory. The two types of operations have unique commercial and operational aspects that make it difficult (or misleading) to make general statements about the entire LNG industry.
• The commercial arrangements behind LNG are complicated and expensive, generally requiring several joint venture partners to invest billions of dollars of ‘at risk’ capital into the project. The scale of the projects is reinforced by the fact that they dominate the list of Australia’s most expensive industrial developments.
• LNG projects are international in nature and involve collaboration with joint venture partners and customers in China, Korea, Japan, the United States of America, France, Spain, Malaysia, and Taiwan.

This article was written by Connor Pound from the UQ Gas & Energy Transition Research Centre.