The COVID-19 crisis has brought Australia's world-beating LNG industry to a crossroads.
Just months after Australia took over from Qatar as the planet's biggest LNG exporter, over $12 billion of write-downs across the sector due to slashed oil price forecasts have exposed the cracks in the last decade's exuberant $310 billion investment in new plants.
The cost blowouts caused by the extraordinary race to build seven huge new LNG export plants – including three cheek-by-jowl on Gladstone harbour – have called the industry to account.
At the same time, record-low prices for LNG in Asia this year have further undermined the already disappointing royalties and tax-take for governments, as export revenues face a dive of up to $20 billion this financial year.
Now some big decisions need to be made on new multibillion-dollar gasfield investment to prevent output sliding at LNG plants around the country and to ensure Australia keeps its key role in meeting the expected recovery in Asian gas demand.
But $90 billion of investments in new field development in Australia and Papua New Guinea have been put on ice since oil prices collapsed in March, while Asian customers, including the Chinese, are hesitating to lock themselves in to new long-term purchase contracts as they reassess their appetite for gas in the wake of the pandemic.
A resolution is also needed in tensions that have boiled over between powerful oil multinationals and local partner Woodside Petroleum in north-west Australia, which are hindering the development of huge new offshore fields such as Scarborough and Browse.
In the east, while Shell and PetroChina have defied the weak market and embarked on the development of their $10 billion Arrow coal seam gas fields near Dalby, southern Queensland's coal seams aren't producing as strongly as geologists had banked on when the state's LNG industry was in its embryonic stage.