(EnergyAsia, August 14 2014, Thursday) — The following is an edited version of a commentary by Amanda Tay of UK energy consultant Douglas Westwood (DW).

Recent news headlines on Australia’s liquefied natural gas (LNG) sector seem to be centered around its unsustainable rising costs.

Woodside Petroleum had to ditch plans last year for its Browse LNG project which had far exceeded the original budget to reach US$80 billion while Woodside Petroleum and its partners have turned to floating LNG (FLNG) vessels as a practicable alternative to continue with their plans. Recently, Santos and GDF Suez have also scrapped plans to build gas plants off coast of Northern Territory state.

The projects that have proceeded to implementation have seen significantly increased costs. The 80%-completed Gorgon LNG project is now estimated to cost US$54 billion, up 46% from the original budget of US$37 billion.

Contrast this with the situation in the US where an Australian firm is planning to build a new export-oriented plant in Louisiana state for just between US$2.2 billion and US$3.7 billion. Magnolia LNG LLC, a subsidiary of Liquefied Natural Gas Limited (LNGL), expects to start up its eight-million metric tons/year plant in 2018.

Another Australian firm, Woodside, is also looking abroad to achieve better economics for its LNG plans.

Australia could lose US$97 billion of potential LNG projects to East Africa and North America unless radical cost reduction is applied.

Furthermore, Russia and China recently concluded a major long deal gas supply deal worth US$400 billion that could further undermine several of Australia’s projects.

The growing competition from abroad has forced Australia to actively explore ways to reduce its high cost structure.

Even if Russia succeeds in launching its China gas supply deal, it will only help meet six percent of the Asian nation’s gas demand by 2030. China has to continue seeking diversity in its energy sources.

Australia will have to explore and implement new technologies and innovations such as FLNG vessels to overcome its high cost challenges.