BREE (Bureau of Resources and Energy Projects) has released its much anticipated major projects update and although the numbers are epic, the peak is very much in sight. Just to confuse, BREE has introduced a methodology, making like for like comparisons with past reports difficult:
This release of the Resources and Energy Major Projects report covers the six month period from April 2012 to October 2012. The report provides a comprehensive list of projects, but uses four different categories to classify projects where previously only two categories were used. The new categories, based on the stages of the investment pipeline, include the Publicly Announced stage, Feasibility Stage, Committed Stage and Completed Stage. Unlike past reports, BREE now provides an indicative cost estimate for all projects included on its list.
BREE identifies 106 projects at the Publicly Announced Stage with a potential value of over $91 billion, 171 projects at the Feasibility Stage that have a combined value of $292 billion, 87 projects at the Committed Stage worth $268 billion and 24 projects at the Completed Stage worth $12 billion.
Although the number of projects at the Committed Stage has decreased since April 2012, the capital value has increased. The increase is primarily a result of the approval of a second train for the Australia Pacific LNG project and cost increases to projects that were already committed.
So the number of projects is falling but the value is rising on cost blowouts in mega-projects:
Australia’s current surge in mining and energy industry investment has been fuelled by ‘mega’ projects that cost more than $5 billion. There are 11 mega projects at the Committed Stage that account for 75 per cent ($201 billion) of the committed total ($268 billion) and most of these are LNG projects. To illustrate the size, complexity and importance of the investment in LNG projects, if just one of the large LNG projects currently at the Feasibility Stage were to receive a positive FID in the next twelve months, there would be more invested in LNG, gas and petroleum projects in Australia than the total amount spent by the US Government on the Apollo Moon Program (in 2012 prices).
Unfortunately, at this stage, I do not expect another approval, but we shall see, perhaps Browse. Here are the two key charts. The falling number and peaking value of committed projects:
And an accelerating decline as well in uncommitted projects:
A very impressive but shrinking pipeline. And remarkably, not enough to sustain our standards of living if it does not keep substantially converting to real projects.
BREE Resources and Energy Major Projects Report – October 2012