OIL & GAS PRICES

OIL PRICES

World energy consumption growth was at 5.6%, the highest rate it has been since 1973. Oil showed the slowest growth rate at 3.1% production reaches record of 87.4 million b/d as a result of oil prices averaging the second highest on record being one of the largest percentage increases since 2004.

In the past 12 months, political troubles in the Middle East caused spikes in oil prices above $100/barrel reminding Australia of the dependency on imported petroleum. Several sources have indicated that the world will not be able to meet its demand for oil by 2015 while some indicate that this could be early as 2012. Thus future oil prices will be expected to rise steadily over the next several years.

Gas Prices

Natural gas prices showed strong divergence from oil prices with the growth rate more than double at 7.4%, the largest growth rate in more than 25 years. The global gas trade in 2010 saw an increase by 10.1% highlighting the world's increasing demand for gas. LNG presently accounts for 30.5% of the global gas trade with Asian countries seeing the largest volumetric growth in terms of importing.

Both conventional and unconventional gas is becoming increasingly important, both as a source of export income and as a domestic energy source in Australia. There are three distinct regional markets in Australia for gas prices: the eastern market (Queensland, New South Wales, Australian Capital Territory, South Australian and Tasmania); the western market (Western Australia); and the northern market (Northern Territory).

Domestically gas prices in eastern states are forecast to reach $8 per gigajoule from the growing development at Gladstone. Sources have indicated that oil prices could reach $140 per barrel which translates to a LNG netback value of $16.15/GJ. It was suggested that such a price would remain until growth in LNG stops in the mid 2020s when prices will fall by $1-2/GJ before rising back to former levels due to reserve depletion.