The industry’s main products are crude oil (including condensate), liquefied petroleum gas (LPG) and natural gas. Natural gas is also processed to yield LNG.
Natural gas became the industry’s most important product for the first time in 1995-96. Over the next six years, it alternated with oil as the industry’s major product. By 2002-03, natural gas had become entrenched as the industry’s major product. The shift reflects the combination of ongoing expansion of natural gas output and much less buoyant oil output.
Crude oil prices in US dollars are expected to trend up over the next five years, as economic conditions firm, the demand for oil strengthens and supply constraints intensify. As more easily extracted sources of oil become depleted, extraction costs are rising.
Worldwide, oil is being pumped from deeper offshore fields in less hospitable locations, and from smaller, more challenging onshore deposits. In addition, tensions in the Middle East, the location of the world’s major readily accessible oil reserves, are expected to remain high.
Ongoing improvements in fuel efficiency are moderating growth in demand for petrol and diesel, the two main transport fuels, but that trend is swamped by rapidly growing demand for fuel in developing countries, where the vehicle fleet is older and generally less fuel efficient. China and, to a lesser extent, India are expected to continue leading demand over the next five years.
Overall, oil prices are expected to rise as demand continues to put pressure on supply. However, unexpected political events or natural disasters could give rise to sharp and substantial, if short-term, movements in oil prices. In a climate of finely balanced supply and demand, buyers are likely to respond to disruptions in supply by bidding prices up. Crude oil prices in Australian dollars are expected to follow an upward trend during the next five years. After adjusting for inflation, Australian-dollar crude oil prices in 2017-18 are expected to be higher than in 2012-13.
Crude oil production from the mature fields in Bass Strait is in long-term decline. Some of the fields in this area have been in production for over 40 years. Over the next five years, increased crude oil and condensate production from the Carnarvon Basin and the Timor Sea will fail to offset falling production from fields in Gippsland.
To purchase IBISWorld’s full report on Australia’s oil and gas sector, click here.
