Reports from the field list several LNG projects being pulled together by companies operating around northern Australia and into Papua New Guinea and Indonesia.

“It’s easy” is the common theme of the proponents behind these proposed developments.

All that’s needed is: a gas resource (plenty of those); a king-size fridge; a few hundred kilometres of pipe, storage tanks and a load-out terminal; and a loud whistle to call up the occasional passing LNG tanker to collect a load of gas which will be dropped off at a customer in China, or some such place.

Said quickly, like all bright ideas, it sounds simplicity itself. But there are two reasons it will not be easy – LNG is booming because the oil price is booming, and the issues that dogged big oil and slowed its LNG plans will also dog small oil and its LNG plans.

These issues include difficulty in obtaining: environmental and other government approvals, particularly for gas with a high CO2 content; shipping agreements and secure offtake agreements with customers; and pliable bankers with the stomach to tolerate major cost blow-outs.

Seasoned observers of the petroleum industry know there’s nothing new in Slugcatcher’s list of issues.

Novice players and novice investors do not recognise LNG is a lot more complicated than conventional pipeline gas, or oilfield developments, not least because it remains fiercely expensive, and cannot be undertaken with a short-term approach. Chevron, for example, speaks of its proposed Gorgon development as a 60-year project – which would see everyone involved through to retirement.

But when a casual observer runs his eye down a list of LNG possibles and probables, he comes away with an impression this is like any of the many “wish lists” seen during a boom. And, at the risk of getting a little biblical, there are always some proposals which succeed, some which stagnate, and some which “fall on stony ground” and die.

A few years ago, a boom atmosphere promised steel mills up and down the west coast of Australia (none happened), plus petrochemical plants (we now have one ammonia plant), aluminium smelters (none), pulp and paper plants (nil), exotic metals factories turning out stuff like gallium and yttrium (one, closed). And the list goes on.

LNG, we are told, is different. It is a product whose time has come.

The Slugr agrees LNG has certainly come a long way over the past 20 years.

LNG processing and re-gassing technology is no longer novel. There are more than 100 LNG trains up and running around the world. The “closed loop” production process whereby a gas processing plant was dedicated to a handful of customers has started to break down, leading to the beginning of a spot market. And the price differential between LNG and oil is narrowing.

These factors are positive signs that LNG is coming of age, especially as the world demands cleaner fuels.

But do the changes really mean LNG has become a product that fits the production profile of small petroleum companies?

“Up to a point”, is the correct answer. Mini-LNG plants to supply trucking fleets and remote area power stations is an excellent starting point – and perhaps a finishing point for small LNG producers.

Once you move up to the world of mainstream LNG, requiring production trains of the size seen on the North West Shelf, or of that proposed by Santos and its Gladstone coal-seam to LNG plant, or Gorgon on Barrow Island, the game changes.

This part of the industry has undoubtedly become more open to sole owners such as Santos and Woodside with its Pluto project. But the shift from complex, risk-sharing, joint ventures of the type seen at Gorgon and the Shelf, has taken the best part of 20 years – and we are yet to see if it will prove to be financially wise.

There are plenty of outsider critics suggesting Woodside has bitten off more than it can chew with its decision to proceed with Pluto as a sole operator, with a few percent tossed across to a couple of Japanese customers.

And there are plenty of critics who are yet to be convinced the Santos coal seam methane LNG plan is anything more than a clever plan to push up the price of gas along Australia’s east coast, and that CSM will prove to be a difficult feedstock for an LNG plant which needs big and consistent flows of gas.

Slugcatcher reckons Woodside and Santos should be praised for the groundbreaking work they’re doing in changing the face of Australian LNG.

But he also believes LNG remains a big ticket item for companies with extremely deep pockets, for bankers with big cheque books, and for a rock-solid list of offtake customers who will guarantee to take delivery of the gas produced.

The era of small LNG is getting closer – but we ain’t there yet.

First published in the September issue of Petroleum magazine