A LNG (Liquefied Natural Gas) tanker is seen behind a port in Yokohama, south of Tokyo, Japan. Reuters/Yuya Shino

Australia’s LNG boom is not yet over despite a surplus in the global market and a sustained slump in LNG prices, a BP economist claims.

Speaking to Business Spectator last week, BP group chief economist Spencer Dale said that low prices, coupled with a growing demand from Asia, would work in Australia’s favour in the long run, even though the International Energy Agency had suggested the industry would struggle to break even over the next few years.

“There’s a surplus of energy for a while and prices will reflect that. But the long-run economics I think look pretty good,” Dale said.

His comments echo BP’s 2016 Energy Outlook, which foresees growing energy demand as the world economy expands, with fossil fuels to remain the dominant source of energy. Within this category, gas will become the fastest growing fuel source as various countries, including China, look for greener energy alternatives to coal.

Australia, expected to become the world’s top LNG exporter by 2017, will be able to ride this wave of increasing demand for gas, spurred on by ample supplies and supportive environmental policies.

The country will see more than $180 billion of LNG export projects come online over the next two to three years, including the Gladstone LNG project run by Santos, Australia Pacific LNG plant under construction by Origin Energy and Conoco Phillips, and the $54 billion Gorgon gas project in Western Australia by Chevron, ExxonMobil, Royal Dutch Shell and other partners, which is slated to start shipping out its first LNG exports in the coming weeks.

These pipeline of projects will produce approximately 53 million tonnes of LNG per annum by 2020, and according to a 2015 RBA bulletin, will mean that LNG becomes Australia’s second largest commodity export in value terms after iron ore by 2018, with the biggest demand to come from Asia.

The Department of Industry projects that LNG exports will bring in an estimated $48.97 million in revenue.

However, what might seem to be a rosy future for LNG could spell bad news for another resource -- thermal coal -- as the former outpaces the growth of the latter.

In a recent report by the Sydney Morning Herald, Macquarie analysts point out that surplus LNG may displace coal in regions with spare capacity such as Europe, or see a race to the bottom in terms of pricing with coal in the spot market.

"If the European scope for taking volume is exhausted, it means LNG potentially pricing into China or elsewhere in Asia (for industrial processes as much as power generation), meaning knock-on impacts for other emerging nations who may rethink their 'coal is cheapest' strategy," analysts said.