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PERTH, May 16 AAP

May 16 2013, 1:41PM

Investment in Australia's resources sector is expected to peak at a record $85 billion this year, led by unprecedented spending in the oil and gas sector.

Consulting Group Wood Mackenzie predicts spending on upstream gas will reach $48 billion this year and $50 billion in 2014, accounting for around half of all resources investment in Australia over two years.

This will be followed by iron ore which is expected to make up 25 per cent of spending and coal which is likely to account for 10 per cent.

Wood Mackenzie predicts iron ore investment will peak this year at $22 billion while coal will remain subdued for the next few years due to lower prices.

Head of Australasia Upstream Research for Wood Mackenzie Chris Graham said the unprecedented level of oil and gas investment over the past few years would continue.

"The outlook for the next three years confirms the strength of the Australian resource sector, as we see investments being made based on decisions taken during the boom years," Mr Graham said.

But he said more major gas and iron ore projects were needed to maintain investment levels in the longer-term.

Head of Global Metals and Mining Supply Research Gero Farruggio said the Australian iron ore sector had invested heavily over the past five years, lifting Australia's share of global seaborne trade from 35 per cent in 2007 to 44 per cent in 2012.

"Capital investment in the Australian iron ore sector will reach a peak in 2013 as infrastructure construction and mine expansions are completed by the majors, and Chinese steel production growth moderates," Mr Farruggio said.

He said Australia's dominance would increase further, taking its share of global seaborne trade to more than 50 per cent by 2016.

Still, the resumption of deferred coal projects and the development of new producing areas would keep spending strong through to 2017.

This would lead to coal overtaking iron ore as the commodity with the second highest investment.

Wood Mackenzie found investment in iron ore would push investment in WA to record levels while spending for the seven LNG projects in WA, QLD and NT would ensure investment remains high for the next three years.

By Kim Christian