More than just hot air: Rising prices and increasing production of gas will lift industry revenue

Australia’s oil production is wavering but gas output, including coal seam methane, is growing strongly. The oil and gas production industry’s revenue is expected to grow at an annualised 4.3% over the five years through 2012-13, to reach $42.3 billion. Industry revenue is forecast to increase by 14.9% in 2012-13 as higher prices and increased natural gas output more than offset a fall in crude oil production.

The gain will be made despite the introduction of a carbon tax on July 1, 2012. The industry, which is expected to make a net profit of $19.1 billion in 2012-13, will contribute about 2.7% of Australia’s GDP. Crude oil and condensate production is expected to be about 23,100 megalitres in 2012-12, while the output of liquefied petroleum gas (LPG) amounts to 3,845 megalitres and that of natural gas to 59 billion cubic metres (including coal seam methane). The high levels of output reflect new fields and expanded production at existing fields.

The industry is a substantial exporter of oil and gas, but also relies heavily on imports of oil. The high level of trade reflects abundant natural gas reserves, a shortfall in local oil output (relative to demand), and quality and geographic mismatches between local oil production and the requirements of local refineries. The domestic market for oil and gas is valued at $35.2 billion in 2012-13.

The industry is a large employer, with 15,303 employees and a wages bill estimated at $2.73 billion in 2012-13. Wage rates have been growing strongly as the industry strives to attract workers to remote locations. The industry consists of about 173 establishments and 53 enterprises.

Industry at a Glance

Industry performance is expected to improve dramatically over the next five years in response to rising production (especially of natural gas) and higher prices for oil and gas. The number of operating export oriented liquefied natural gas projects is expected to grow from two in 2012-13, to nine during that period. Industry revenue is expected to expand at an annualised 16.9% over the next five years, to reach $92.6 billion in 2017-18. Profit is expected to expand at a somewhat faster pace, as rising output offsets continued cost pressures.

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