By Andrew Hobbs, Group Editor
LOWER oil and gas prices have had at least one undeniable upside for the industry – studies have shown that the rate of piracy offshore West Africa has dropped in 2015.
Florentina Adenike Ukonga, the executive secretary of the Gulf of Guinea commission – a regional body that exists to promote cooperation between West African states – told Bloomberg that piracy had declined alongside the oil price.
“With oil at a low bottom price of below US$30 per barrel, piracy is no longer such a profitable business as it was when prices hit US$106 a barrel a few years ago,” she said.
“The price drop has contributed a great deal in reducing piracy and other maritime crimes in the Gulf of Guinea.”
Despite falling piracy levels, nations bordering the Gulf should work to continue improving security coordination, she said, highlighting a concern that attacks would pick up speed once oil prices rebound.
While the connection may not be so specific in our part of the world, there is nonetheless some bittersweet irony that, for whatever reason, pirates have decided that stealing crude oil isn’t worth the effort.
The impact of lower oil prices is being felt among Australia’s energy majors and the companies that service them, with Santos recording significant impairments on its onshore assets and significant staff layoffs among other groups.
But Australia’s oil and gas exports continue to generate positive news for the nation, with a report recently released by Australian energy analyst EnergyQuest finding that the value of Australian oil and gas exports had almost offset the cost of importing crude oil, petrol and other petroleum products for the first time in five years.
The cost of imports had not fallen in line with the fall in oil prices, EnergyQuest chief executive Graeme Bethune said, attributing this to a rise in import volumes due in part to the closure of Australian refineries.
“Even though the fall in the cost of petroleum imports was less than the fall in the oil price, the strong export performance was sufficient to eliminate the petroleum deficit,” he said.
Despite a fall in the Australian dollar and in oil prices, the value of LNG production remained virtually constant in 2015, due to the rise in volume produced, he said.
“Altogether, Australian LNG production reached a record 9.1 million tonnes in the December quarter 2015, up by 48 per cent from a year earlier,” he said.
“Increased LNG production has offset the fall in LNG prices resulting from the slump in oi l prices.”
“As LNG production continues to grow, petroleum is likely to make an increasingly positive contribution to the overall Australian trade balance,” Dr Bethune added.
Indeed, federal resources minister Josh Frydenberg told a recent Press Club luncheon that he predicted LNG export earnings would triple to $49 billion by 2019-2020, while global demand for gas will also grow.
But while demand is set to be strong, oil and gas prices are considered likely to remain low in the short term – as even a freeze in production levels mooted by members of the Organisation of Petroleum Exporting Countries is expected to have little impact against stockpiles.
The US Energy Information Administration predicts Brent crude prices will average US$38 per barrel throughout 2016, rising to US$50 per barrel in 2017.
As I write this, Mr Frydenberg is leading a delegation of Australian business representatives to the United States to pursue investments, including a visit to energy industry event CERAWeek.
This follows a memorandum of understanding signed in late January with the government of Colombia to boost energy sector ties.
While Australia is set to generate an enviable income through the export of its LNG reserves, it remains incumbent on government and business to make the most of the opportunities that interest and income affords, even if the days of US$100 per barrel are over.
Accenture Asia Pacific Energy lead Bernardette Cullinane told Oil & Gas Australia last month that Australia would be in a strong position to take advantage of its natural gas resources – if it ensured that the right skills were developed and maintained.
“The skills and the experience of the sector will truly be the envy of oil and gas producing nations and it is important that Australia embrace the opportunity to become ‘Australia Inc’ in LNG and create export related services in LNG operations, similar to what Norway did.”
Failing to do so is a missed opportunity equal to daylight robbery – and no pirates would be required.