Extraction industry to soar

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By Courtney Pearson

July 6, 2015

THE Australian oil and gas extraction industry is set to grow 12.8 per cent in the next financial year on the back on demand from Asian markets.

IBISWorld business information analysts predicted that

revenue would soar from about $40.8 billion to $45.4 billion in the 2016 financial year, after experiencing annual growth of 5.8 per cent between 2010 and 2015.

IBISWorld attributed the 12.8 per cent rise to growth in demand from Asian markets, particularly Japan.

Japanese energy suppliers converted to gas plants post-Fukushima, and Australian producers are well-positioned to cater for this increased demand, the report stated.

“Strong demand from Japan for natural gas will be met by increasing LNG production across Australia,” IBISWorld senior industry analyst Ryan Lin said. “Investment in export facilities will also make the Japanese market more accessible to Australian producers.

“In conjunction with growing production, selling LNG at global prices, rather than the cheaper domestic prices, will provide an additional boost to industry.”

The resources boom provided a strong foundation for growth in oil and gas extraction but a fall in investment would damage industries that service the construction on projects, the business information company stated.

Meanwhile, as the production phase starts to get into full swing, site preparation services and machinery and scaffolding rental were predicted to fall by 6.9 per cent and 6.6 per cent respectively.

Mr Lin said that the majority of large-scale mining projects had been completed, which left little room for further capital investment in projects. “Site preparation operators are expected to rely on traditional infrastructure projects for growth in 2015-16, such as building, road and bridge construction,” he said.

Furthermore, Mr Lin said companies would hold off new site development on the back of lower commodity prices.

“While demand from traditional construction activity will grow, and mining companies in a production phase will continue to rely on rented machinery, this will not be enough to offset the decline in mining investment,” he said.

Other industries predicted to experience growth were child care services, beef cattle farming, funds management services and data centres. Growth in the ceramic product manufacturing, credit unions and national and regional commercial bank industries was expected to fall.