Australia is a hotbed for natural resources, particularly fossil fuels used to generate energy. The country exports nearly two-thirds of its energy production, ranking first in the world in coal exports and fourth for liquefied natural gas exports.
Renewables
Renewables exist in Australia, but not on a meaningful scale. The country increased its solar capacity more than 135% in 2011 to 1,345 megawatts, just shy of 2% of the global total. The country's wind capacity at the end of 2011 was much higher, at 2,476 MW, but that only accounts for 1% of the global total. When it's all said and done, fossils fuels account for 95% of Australia's energy consumption and 92% of electricity generation.
Australia has a goal to produce 20% of its electricity from renewable resources by 2020. Ambitious yes, but Australia's incentive to reach the goal is higher than in other places. The country generates more pollution per person than any other developed nation -- including the United States.
Nuclear
As of 2010, Australia was estimated to hold just under half of the world's recoverable uranium resources. Somewhat inexplicably, the country does not have a single nuclear reactor. Two of the world's largest mining companies, BHP Billiton (NYSE: BHP ) and Rio Tinto (NYSE: RIO ) are headquartered in the country; both produce uranium.
Coal
Over the past 20 years, coal production in Australia has increased nearly 100%. The country is the world's fourth-largest producer, and the No. 1 exporter. Australia produced 449 million short tons of coal in 2010, and exported about 322 MMST of that. Top destinations for Australian coal are Japan (43%), South Korea (15%), China (14%), and India (11%).
Oil
Australia is not a big player on the world oil scene. Its proved reserves are estimated at 3.32 billion barrels, and production in 2011 averaged just over 464,000 barrels a day. Though it doesn't have much oil, it does have the sort of oil that everyone wants. Australian crude is a low-sulfur light crude that is easy and cheap to refine, and thus more desirable than heavy crudes.
Natural gas
Natural gas is crucial to Australia's future. The country has proven reserves of 110 trillion cubic feet of natural gas, the 12th-largest in the world. Those are just conventional resources; Australia also has an estimated 396 TCF of shale gas reserves. Natural gas production reached 1.6 TCF in 2010 and is expected to increase four times over by 2035.
Australia is the world's fourth-largest exporter of liquefied natural gas. LNG exports brought in $10.5 billion in 2010-11, an increase of 34% over the previous year. With at least two major LNG export facilities slated to come online in the next five years, expect that number to increase.
Geopolitical risk
Australia is really as innocuous as it gets. Unlike many regions of the world, there are no nationally owned energy companies here. The government has no stake in the oil and gas industry, which limits risk for foreign companies targeting Australian resources.
Similar to the U.S., Australian states have the ability to govern energy production in their territory, to a point. �In theory, this set up could affect energy development on a case-by-case, regional basis.
Finally, Australia relies heavily on exporting energy to economies in Asia. If that market faced a significant downturn, the effect on Australia would be tremendous. Conversely, growing energy demand in that region could buoy export revenues to new levels.
Players
Chevron (NYSE: CVX )
Chevron is a dominating player in Australia's LNG business. The company is the operator of two LNG export facilities currently under construction. The Gorgon project on Barrow Island, off the northwest coast of Australia, is expected to come online in 2014. The Wheatstone facility, also off the coast of Western Australia, is expected to go into production in 2016.
Apache (NYSE: APA )
Apache has been in Australia since the early 1990s. In 2011, the company produced 38,228 barrels of oil per day, and 185,079 cubic feet of natural gas per day. The company's estimated proven reserves are 330 million barrels of oil equivalent.
Perhaps most importantly, Apache has a 13% stake in Chevron's Wheatstone LNG export facility.
BHP Billiton
BHP Billiton operates the largest individual coal production site in New South Wales. The Mount Arthur coal mine produces 20 million tons each year. The company expects its expansion plans to increase that number to 24 million tons.
The company mines uranium at its Olympic Dam mine in South Australia. The mine is the largest known uranium deposit in the world. BHP recently purchased four exploration licenses for $3 million for acreage surrounding the mine.
Rio Tinto
Severe weather in Australia affected production at each of Rio Tinto's four Queensland mines in 2011. However, high prices for coal led to $1.24 billion in earnings for its Australian coal sector, which was a 32% increase over 2010. The company expects coal production to increase in 2012 via expanded capacity at its mines. Expansion projects should also increase its output of uranium.
Royal Dutch Shell (NYSE: RDS-B )
Shell is pushing the LNG envelope with its implementation of a floating LNG facility. FLNG allows gas to be produced and processed in remote offshore locations, as the FLNG facility sits right above the field. Last spring, Shell's board gave the go-ahead on the project. Once constructed, the Prelude FLNG facility will be the largest floating structure ever built. The company has not alluded to the cost or completion date for the structure, but it can be noted that production in the prelude field is slated to begin in 2017.
Suggestions for further reading:
- How Oil Companies Plan to Spend Their Cash in 2012
- Three Ways to Play Australia's Booming Economy
- BHP Billiton Crushes Earnings
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