There are 11 mega projects at the committed stage, which account for 76%, or $201 billion of the total value of currently committed projects.
Further to this, the vast majority of mega projects relate to projects involved with the liquefied natural gas (LNG) sector, as can be seen in the graph below, accounting for the top seven most significant committed investment projects.
Australian resources projects have a lot riding on the natural gas sector at a time when price pressures from the oil and gas industry in the US have been seen a significant competitive intensification and will likely place further downwards pressure on gas prices internationally. At the same time there have been local cost blowouts which are causing the industry to be increasingly uncompetitive on the world stage. According to BREE, the cost increases are related to skilled labour shortages, the high Australian dollar, and transport costs, as well as some scope creep across the projects.
Clearly, the resources sector has some challenging times ahead, and there will be subsequent headwinds faced by Australia’s economic prosperity; it’s no wonder the Reserve Bank are looking towards other industry sectors to fill the economic hole that is being left by the downturn in the resources sector. While the news appears to be pretty glum across the resources sector, the downshift is coming from an ultra-high base and there is still a huge amount of resources projects that remain committed to, as can be seen in the map from the BREE report below.
Tim Lawless is national research director of RP Data. For advice on navigating hotspots, download our free eBook: Tools for Getting Through the Hotspot Maze. This article first appeared on Property Observer.
