PREVIEW-Eyes on Australia LNG projects amid tax battle

* What: Australia oil and gas conference

* When: May 16-19

* Eyes on LNG projects consolidation, delays, costs

By Fayen Wong

PERTH, May 14 (Reuters) - Australia's plans for a surprise "super profits" tax, coupled with a raft of gas projects jostling fiercely for customers, will fuel talk of consolidation among several Australian gas export projects.

Of four large liquefied natural gas (LNG) projects, owned by Royal Dutch Shell (RDSa.L), ConocoPhillips (COP.N), BG Group (BG.L) and Santos Ltd (STO.AX), being proposed at Australia's eastern Gladstone port, three target a final investment decision this year.

With the economics of these coal seam gas-fed LNG projects potentially at the low end because of an oversupplied market, government plans to introduce a 40 percent resource tax on profits would deal a double whammy to profitability.

The new tax has also added another level of uncertainty making likely more delays in securing bank finance, LNG sales contracts, and greater difficulty in selling equity to help finance the projects.

"There is a high probability that some of these projects will start looking at joining forces to improve their returns," said Jason Mabee, an energy analyst at Royal Bank of Scotland.

Mabee said a merger by Santos' Gladstone LNG (GLNG) project to create a larger development with four production trains could reap synergies of about A$2 billion, adding that a hook up with the Shell/PetroChina venture was the most logical.

Least at risk of being delayed or persuaded to merge is an LNG project planned by Britain's BG Group. The project has inked major LNG supply deals with China National Offshore Oil Corp (CNOOC) and Japan's Tokyo Gas, all but securing sales for the A$10 billion to $15 billion development.

Most analysts say it is unlikely the tax will be approved in its current form given the raft of protests from various industries, uncertainties over the start and length of industry consultation periods would inevitably delay potential project equity sales planned by the Santos and ConocoPhillips ventures.

Santos Managing Director David Knox has signalled that its investment decision for GLNG could be pushed back by six months, while Origin warned its project would also face delays.

These issues will be in the spotlight at next week's Australian Petroleum Production and Exploration conference in Brisbane, which is to be attended by heads of some of the Australian and international firms driving the country's biggest ever push to develop its resources.

EYES ON PROJECT COSTS, LNG DEMAND

Investors will also keep a keen eye on project costs guidance given the recent cost blow outs in LNG projects in western Australia as well as comments on regional LNG demand.

The Shell/PetroChina venture has given scant details on the estimated cost of its planned four-train LNG project, while Santos is due to update its cost guidance for the GLNG project, estimated to be A$7.7 billion for a single-train development.

Amid rising steel prices and a worsening skilled labour shortage in Australia, analysts at Royal Bank of Scotland estimate GLNG will cost A$20 billion, based on a two-train project producing 7.2 million tonnes per annum (mtpa).

Weaker LNG demand growth, expected to drop to between 4-5 percent per annum from previous estimates of 6-8 percent, also means that around half of the recently proposed projects could be deferred indefinitely, Morgan Stanley said in a May 9 report.

"Customers looking for supply for the back end of the decade have plenty of choice right now and are in a strong bargaining position compared to a few years ago," said energy analyst Stuart Baker.

"We expect terms for new contracts to soften in line with current market conditions, and this will not help the project economics."

Japan's Inpex Corp (1605.T) said on Friday it would delay final approval of its proposed $20-billion Ichthys LNG project in Australia by a year to late 2011, a move some analysts said could be due to the failure to sign up customers at higher crude price linkages. [ID:nTOE64D04R] (Editing by Clarence Fernandez)