Bureau signals end of boom in commodities
Australia's top commodities agency has detailed a year of woe for the local resources industry and joined the Reserve Bank in declaring the peak of investment in the sector.
The Bureau of Resources and Energy Economics revealed sharp rises in the number of projects suffering cost blowouts or deferrals, and a steep fall in exploration spending.
The findings will fuel perceptions that the resources boom is over and were released on the same day investment bank Citi said 2013 would mark the end of the "commodities supercycle".
In its latest six-monthly report on major projects, the bureau estimated Australia had missed out on $149 billion 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 many of the 18 projects were listed with values far below what has recently been discussed in the market.
The deferred Browse LNG project was judged by the bureau to be worth $36 billion in deferred spending, but those close to the project believe it was set to cost closer to $80 billion before operator Woodside decided to investigate other options.
For projects going ahead, the bureau calculated that $28.5 billion 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 currently committed to resources projects in Australia, meaning the peak of investment in the sector would have been 2012 had the spate of cost blowouts not inflated this year's figures. In declaring 2013 to be the peak of the investment cycle, the bureau predicted that committed investment would fall by $8 billion next year and a further $63 billion in 2015.
By 2017, committed investment was tipped to be back at 2007 levels at about $60 billion, but that judgment is based on the project pipeline, and does not allow for new finds or projects to come through the ranks.
There was further grim news in the bureau's account of exploration spending, which was shown to be sharply lower long before the Labor government imposed tighter tax rules on exploration last week.
High-risk "greenfield" exploration spending in the December quarter was $264 million, a 16 per cent fall from the September quarter and a 27 per cent reduction on the June quarter.
It is likely to have fallen further since, given the accelerated spending cuts announced by many companies, including the new bosses of BHP Billiton and Rio Tinto.
Lower-risk "brownfield exploration" also declined but not as severely.
"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," Citi analysts said.