The strategy in buying the assets is fine, UBS’s Price said. “It’s the price they paid and the timing of that investment that’s questionable. They just seemed to have rushed into it without properly analyzing it, that’s the market view.”
In the U.S., policymakers and industry leaders are divided over how tightly to control gas exports for fear of driving up domestic energy prices. Three gas export projects got approval to ship LNG from Canada’s Pacific Coast to destinations such as Japan and China, compared to just one in the U.S., on the Gulf Coast, according to data compiled by Bloomberg.
In Australia, BHP is a partner in Woodside Petroleum Ltd.’s North West Shelf LNG development in Western Australia. The cost of the project, which started shipping LNG in 1989, was A$27 billion, according to Woodside’s website.
Near-record gas demand from U.S. electricity generators has driven prices back up to more than $4 for the first time since September 2011 even as output climbs. Natural gas yesterday rose 0.4 percent to $4.032 per million British thermal units on the New York Mercantile Exchange.
“What we’ve seen is people switch, for example with power stations, from coal to gas quicker than we expected,” Kerr said.
Gas futures have doubled since trading at a 10-year low as utilities switched from coal and unusually hot weather spurred cooling demand. Gas futures averaged $5.93 per million British thermal units in the five years through 2011, before prices collapsed to a decade low $1.902 in April 2012.
The shale-energy revolution is “going to be something that we’re going to be hearing more about over time,” said Paul Xiradis, chief executive officer at fund manager Ausbil Dexia Ltd. in Sydney. The timing of BHP’s acquisitions wasn’t perfect though , “5, 10 years from now, I’m sure we would look back and say what a great acquisition it was,” he said.