Bureau signals end of boom in commodities
Australia's top commodities agency has detailed a year of woe for the resources industry and joined the Reserve Bank in declaring the peak of investment in the sector.
The Bureau of Resources and Energy Economics revealed a sharp rise in the number of projects suffering cost blowouts or deferrals, and a steep decline in exploration spending. The findings - released on the same day investment bank Citi declared the "commodities supercycle" would end this year - will fuel perceptions the resources boom is over.
In its latest six-monthly report on major projects, the bureau estimated Australia had missed out on $149 billion worth of spending on resources projects over the past year, as a result of 18 big projects being deferred or cancelled.
The sum is likely to be conservative, given that many of the 18 projects were listed with values far below what had recently been discussed in the market.
The Browse LNG project was judged by the bureau to be worth $36 billion in deferred spending.
However, those close to the project believe it was set to cost closer to $80 billion before the operator, Woodside, decided to investigate other options.
For projects going ahead, the bureau calculated that $28.5 billion worth of cost blowouts had been endured over the same period, with Chevron's Gorgon project heading the list.
Those blowouts accounted for about 11 per cent of the $268 billion committed to resources projects in Australia.
This means the peak of investment in the sector would have been last year had the cost blowouts not inflated this year's figures.
In declaring this year to be the peak of the investment cycle, the bureau forecast committed investment to fall by $8 billion next year and $63 billion in 2015. By 2017, committed investment is tipped to be back at 2007 levels - about $60 billion.
There was further grim news in the bureau's account of exploration spending, which was shown to be sharply lower long before the Gillard government imposed tighter tax rules on exploration last week.
High-risk "greenfield" exploration spending in the December quarter was $264 million, down by 16 per cent from the September quarter and 27 per cent from the June quarter.
"This year should provide full affirmation that the commodity supercycle has finally ended and should usher in the first 'normal' year in over a decade in which, broadly, commodity prices end the year lower than when the year started," the Citi team wrote.