BG's $15 Billion LNG Project Sparks 'Dash for Labor'
Comment of the Day

November 03 2010

Commentary by Eoin Treacy

BG's $15 Billion LNG Project Sparks 'Dash for Labor'

This article by James Paton for Bloomberg highlights the continued development of Australia's energy sector. Here is a section:
BG Group Plc's $15 billion liquefied natural gas project in Australia's Queensland state will spark a "dash for labor" as the U.K.-based energy producer and rivals compete for skilled workers, Sanford C. Bernstein & Co. said.

BG committed Oct. 31 to the Queensland Curtis LNG venture, the first of four Gladstone developments to start construction. "We now move from the 'dash for gas' to the 'dash for labor' phase," said Neil Beveridge, a Bernstein analyst in Hong Kong.

The U.K.'s third-biggest oil and gas producer said the project, which will liquefy gas extracted from coal seams, is expected to generate 5,000 construction jobs during the next four years. Santos Ltd. aims to commit to the first phase of its Gladstone LNG venture by the end of the year. That development may cost $18 billion, according to CLSA Asia-Pacific Markets.

"The biggest challenge will be to deliver these projects on cost and on schedule," Beveridge said in an e-mailed response to questions. The demand for labor in the Gladstone region will boost costs and may cause delays, he said.

Santos, which has dropped 10 percent in Sydney this year, gained 0.6 percent to A$12.74 by the market's 4:10 p.m. close. The benchmark S&P/ASX 200 Index gained 0.5 percent. BG, based in Reading, England, has advanced 12 percent in London this year and closed yesterday 3.4 percent higher at 1,252 pence.

Australia's jobless rate, at 5.1 percent in September, is about half the level of unemployment in the U.S. and the euro zone. The International Monetary Fund forecasts that Australia's growth will advance to 3.5 percent next year from 3 percent this year, driven by investment in the resources industry.

Eoin Treacy's view Australia is blessed with an abundance of the resources required for the infrastructural development of its Asian neighbours. The current expansion of the country's energy infrastructure will add another powerful income stream and further cements Australia's position as a leading commodity exporter.

The last year has been relatively quiet for many energy related shares as oil prices broadly ranged but investor interest is being rekindled. Uranium shares have been one of the better performing portions of the energy sector and Australia has its fair share of such companies. Coal bed methane and offshore gas drillers are now also beginning to attract attention following a comparatively fallow period for M&A. (Also see Comment of the Day on March 8th).

BG Group rallied impressively from its 2008 lows to range mostly below 1200p from July 2009. It broke upwards to new recovery highs this week and a sustained move below the 200-day MA, currently near 1100p, would be required to question medium-term upside potential. Origin Energy, Eastern Star Gas and Bow Energy all share the yearlong ranging characteristic and have firmed of late.

Woodside Petroleum rallied impressively from the late 2008 low but hit a medium-term peak near A$55 a year ago. It has posted a succession of lower rally highs since but has lost downward momentum near A$40 and is now testing the downtrend. A sustained move above A$45 would indicate a return to demand dominance.

AGL Resources has paused below A$40 since April but has held the progression of higher reaction lows and these would need to be taken out to question potential for a successful upward break.

Victoria Petroleum rallied impressively from early October, broke the 18-month progression of lower rally highs and continues to improve on that performance. While overbought in the short-term, a sustained move below 35¢ would be required to question the consistency of the 1-month uptrend.

Carbon Energy found support near 30c from May and is currently testing the 200-day MA. A sustained move below 37.5¢ would be required to hinder potential for some additional upside.

Beach Petroleum lost downward momentum from late 2008 and found support near 60¢ in late August. It posted an upside weekly key reversal last week and is following through this week. A sustained move to new lows would now be required to question current scope for some additional upside.

Comet Ridge rallied impressively on Monday but needs to hold above the 200-day MA near 22¢ to indicate demand has returned to dominance. Icon Energy, Blue Energy and Molopo need to break their medium-term progressions of lower rally highs to indicate renewed bullish investor interest.

Following an impressive rally from the 2008 low, Santos encountered resistance in the region of A$16 from March 2009 and has posted a succession of lower rally highs since. While it has steadied somewhat near A$12, a sustained move above A$14 is required to indicate a return to medium-term demand dominance.

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