Global demand for natural gas is expected to increase by over 40 billion cubic feet per day by 2015 and by over 50 Bcf/d by 2025. Those countries that have benefitted from shale gas discoveries in recent years are sitting on abundant and undeveloped energy resources, a huge opportunity for the years ahead.
To bring this gas to profitable markets, the commodity often needs to be transformed into LNG and shipped. Thus, since specialized infrastructure is required, export terminals and other facilities are being built. Exporting LNG to European and Asian markets should be a very profitable venture, where the price for LNG can fetch as much as four times the original price.
Therefore, Australia is a great way to get involved right away in the race for LNG exports. The country is developing its abundant untapped natural gas resources, and several LNG projects are now underway in a race to make the most of this opportunity. Some major U.S. and international producers are currently involved in the play, and now is the time to get involved, before it's too late.
The opportunity: Wheatstone LNG
The Wheatstone LNG project is located at Ashburton North Strategic Industrial Area, about 7.5 miles west of Onslow, in Western Australia. The project includes two LNG trains with a combined capacity of 8.9 million tonnes per annum (Mtpa) and a domestic onshore gas plant. Furthermore, the project has approval to expand to 25 Mtpa of LNG, and ramp-up of the first two trains is expected for 2016.
The Wheatstone LNG project will generate approximately $20 billion in government revenue and more than $17 billion to Australian businesses and services over the first 30 years after inception. Let's see what it really has in store for the investors.
The players involved
The Wheatstone project is a joint-venture that includes the Australian subsidiary of Chevron (NYSE:CVX) with 64.14% in working interest. Chevron is the major partner in this project as well as the future operator. The company is very much involved in the Australian race for energy since it pioneered the first LNG project in the country back in the early 1980s with the construction of the North West Shelf Venture.
Moreover, Chevron is also developing the Gorgon LNG project off the West Coast of Australia, a $52 billion joint-venture between two other major participants, ExxonMobil and Royal Dutch Shell (NYSE:RDS-A). Gorgon will include 15 million Mtpa of LNG, with Chevron owning 47.3% working interest in the project.
Wheatstone includes two other major partners, Apache (NYSE:APA) and Royal Dutch Shell. Other minority partners include Kuwait Foreign Petroleum Exploration, and Kyushu Electric Power, together with P/E Wheatstone Pty, partly owned by TEPCO.
Apache, which has 13% in working interest in Wheatstone, has been present in Australia for more than 20 years. As a matter of fact, Apache owns Western Australia's Devil Creek gas plant, the region's third domestic natural gas processing hub and the first new plant built in almost 20 years. Notably, the plant's facilities consist of two trains designed to process 200 Mmcf/d of gas.
Royal Dutch Shell is also well involved in Australia besides Wheatstone, in which it has a 6.4% working interest. The major producer was also part of the joint-venture that pioneered the North West Shelf Venture project, in which it still owns a 16.67% interest. Furthermore, it also owns 25% working interest in the Gorgon LNG project as well as its Prelude LNG project, a floating LNG terminal planned to be developed for 2017, about 125 miles off Australia's West Coast.
Another way to play the Australian race for energy with Wheatstone LNG is with ATCO Group. The company's expertise has been well known since the 1940s and has developed nicely through the years, currently offering nine operating subsidiaries on five continents. ATCO is engaged in logistics, utilities, energy, and technology infrastructure.
On May 16, 2013, the company was awarded a $100 million subcontract from Bechtel to design, manufacture, transport, install 357 modular units for the Wheatstone LNG project facilities. The units will be built at the company's current manufacturing facilities in Brisbane and Perth. Finally, this agreement represented ATCO's fourth major awarded contract supporting LNG projects in Australia.
My Foolish two cents
As you have seen, Australia has several interesting projects under way, and Wheatstone LNG is a great way to get involved right away in the race for LNG exports. As a matter of fact, the U.S. is plagued for mandatory regulatory approval processes, a rather long awaiting period for LNG terminals before building the necessary infrastructure and start exporting the commodity to non-free trade countries.
Therefore, I think that even if the Wheatstone LNG project needs approximately $29 billion in capital investment, the solid players involved in the joint-venture will assuredly get the job done and profit from this opportunity since more than 80% of the initial capacity is already committed to premier LNG buyers.