Australia's liquefied natural gas (LNG) supply may be heating up just as prices of the commodity are hovering around 18-year-lows, but the outlook for the industry is still solid, an Australian minister suggests.
A record $200 billion has been poured into Australia LNG production in the last decade, with the country set to overtake Qatar as the world largest LNG exporter by 2020. LNG is a natural gas, mostly methane, that has been cooled until it becomes liquid for easier transport and storage. It is a cleaner-burning fossil fuel than rivals coal and oil.
But even though these mega-projects are coming online amid the price slump, that shouldn't dent expectations for the industry's outlook, said Josh Frydenberg, Australia's minister for resources, energy and Northern Australia.
"I think people are very positive about its future and that's driven by what I call the mega-trends in demographics: The increase in population particularly in Asia, the growing middle classes, the increase in urbanization -- all that is driving a greater demand for gas," Frydenberg said on the sidelines of an industry conference in Perth.
But just because demand for LNG may pick up, industry players weren't entirely certain that would benefit Australian players in the sector.
Against the backdrop of a price slump, supply glut and slowing demand, industry players at the industry conference in Perth have cited the high cost of business in Australia as a further drag, particularly as North American shale gas is rising as a serious competitor to LNG.
"The question going forward as this tranche of supply comes to the market is where the next tranche of supply going to come from," said energy giant Chevron's Chief Executive John Watson.
"The opportunity is going to for those who can get cost down and compete in the market place," he told CNBC on the sidelines of the same conference.
But Frydenberg indicated the country is aiming to counter price concerns, saying the government is committed to keeping Australia business-friendly.
"The government seeking to drive down the costs of doing businesses in Australia," he said. "We are constantly updating our tax system and we are trying to cut regulations particularly around environmental approvals, not to diminish the standards anywhere, but to streamline the process, to have a one-stop shop."
He indicated Australia is still aiming to increase output of resources, even amid a global supply glut of many commodities.
"We have the government who can help to put in place the necessary infrastructure to support major projects. So, we are very determined as a government to continue to attract global investments," he said.