(EnergyAsia, October 21 2016, Friday) — Australia’s petroleum trade will remain a tale of two opposing trends for the rest of the current fiscal year ending June 30 2017: falling crude and condensate exports, and rising product imports.
Crude and condensate exports will fall by 2.6% from 241,000 b/d in fiscal 2015 to 235,000 b/d in fiscal 2016, according to a forecast by the Department of Industry, Innovation and Science.
Going in the opposite direction, Australia’s product imports will surge by 18% to 593,000 b/d to reflect the decline in domestic fuel production following the closure of two ageing refineries.
The fall in export volumes is consistent with the decline in crude and condensate production as companies are cutting back on upstream budgets on account of weak oil prices.
“Australia’s output is expected to fall by 5% in 2016–17 to 301,000 barrels a day as natural decline at established fields outweighs new supply, such as condensate production from the Gorgon project in Western Australia,” said the Department in its most recent quarterly update.
The report did offer a consolation: the earnings from crude and condensate exports are expected to rise 5.7% from A$5.47 billion last year to A$5.78 billion in FY2016. This is due to “rising oil prices, which will more than offset the anticipated decline in export volumes,” said the department.
It expects the crude oil price to rise from an average US$44 a barrel in 2016 to US$55 a barrel next year.
“Persistent low prices have seen producers reduce investment or exit the industry, sowing the seeds for tighter future supply conditions,” it said.
But rising oil prices will have a double edge as Australians will end up paying more for their imported fuels.
While the department did not provide a forecast for Australia’s fuel import bill for FY2016, it has projected an 18% surge in import volumes.
Furthermore, it has observed that imported refined products represented 62% of domestic consumption in FY2015, up sharply from 53% the previous year.
“The increase was driven by declining domestic production of refined products, which fell by 16% to 445,000 b/d in 2015–16, because of the closure of the Kurnell and Bulwer Island facilities. This represented the third consecutive year of falling refinery production,” it said.
Australian existing refineries will remain under competitive pressure from newer and much larger plants in the Middle East and Asia supplying products to markets around the world.