The KPMG report, Energy and Mining Outlook for Australia 2007, released yesterday, examines the opportunities and challenges across the minerals and oil and gas sectors and domestic energy market.

Using a number of sources, the report predicted iron ore and LNG were likely to be the major growth drivers in the minerals and energy sector.

But it warned future growth in major projects including iron ore and LNG were potentially being offset by a decline in exploration and infrastructure investment and a worsening skills shortage.

The project predicted export earnings in LNG would increase 22% to $6.1 billion in 2006-07.

“The growth in Australian minerals and energy (dominated by LNG) exports is expected to continue well into the future, with new studies finding the country has entered a period of record development spending,” it said.

The report also said an estimated 256 new minerals and energy projects, with a combined capital expenditure of $1.31 trillion, are now committed to or are under consideration.

KPMG Partner for Energy and Natural Resources Alison Kitchen said Australia is harnessing its strengths, including geological wealth and a stable political environment, to emerge as an “international player” in the minerals and energy industry.

“Many of our overseas clients are looking to Australia as an investment option but it can be challenging if you are on the outside to get a clear picture of the opportunities available,” Kitchen said.

“So we need to keep our eye on the ball in terms of investment in infrastructure and exploration, if we are to retain this position.

“Australia is in an ideal position to be a supplier of some of the world’s most important commodities and despite the recent comments by the Australian Treasurer [Peter Costello] saying the resources boom has peaked, the vibrant market tells another story.”

The report called on governments to introduce “more attractive” fiscal and investment policies as concern grows over an increasing decline in exploration.

“While there have been some small adjustments and some recent increased funding for onshore energy exploration projects, it appears that a recent upswing in exploration activity is largely driven by high commodity prices and is not sustainable in the longer term,” it said.

Recent figures have estimated that minerals exploration expenditure will rise a “respectable” 13% to $2.3 billion in 2005-06, while petroleum exploration will increase a “more modest” 5% to $1.1 billion in the same period, the report said.

“While in real terms the minerals spend is the highest for almost a decade, the petroleum outlay is 4% below the average expenditure in real terms over the past 25 years,” it said.