LNG

The Australian Government said the nation’s LNG export revenues are expected to decline from A$72 billion (US$47Bln) in the current fiscal year to just under A$45Bln by 2028-2029 as volumes flow in a tight market, though prices will ease in real terms towards the end of the decade.

The Australian Government said that given the inherent seasonal variability in European natural gas consumption driven by heating demand, there remains a risk of further price volatility in 2023 as seasonal conditions change.

The European Union currently lacks the firm liquefied natural gas contracts needed to fully offset lost Russian pipeline gas volumes, which will force the bloc to source its marginal LNG supplies from global spot markets when needed, according to the latest Australian “Resources and Energy Quarterly” from the Office of the Chief Economist.

“As such, LNG markets are expected to remain in moderate shortfall over 2024 and early 2025, as Europe continues to replace lost Russian pipeline gas with LNG imports,” stated the report.

“Our base case is for Asian spot prices to average US$14/MMBtu over the outlook period, with risks skewed to the upside for the reasons mentioned above,” added the report.

“While this price is well below levels averaged over 2022 (US$33/MMBtu), it is still double the five year, pre-2020 average of US$7/MMBtu,” stated the report.

Export plants

Australia itself has 10 LNG export plant and in 2022 shipped 82 million tonnes of LNG valued at A$91 billion (US$60.55Bln).

The report forecasts that national LNG income will fall through fiscal 2024-2025 to A$60Bln (US$40Bln), with volumes also easing to 79MT over the same period.

“While volatility in LNG markets could re-emerge over the Northern Hemisphere winter and boost spot sale earnings, the base case is that lower energy prices will cause the value of Australian LNG exports to fall,” said the report.

The cargoes last year were mainly delivered to Asia and with 80 percent of volumes being unloaded in Japan, China and South Korea.

Around 75 percent of the cargoes were sold under long-term contracts.

The Australians believe that global LNG trade is expected to grow by 13 percent, or 51MT, over the two-year outlook relative to 2022.

Almost half of the growth (24MT) will come from newly commissioned US LNG plants, while facilities in Nigeria will also contribute 7MT.

Forecasts indicate that most of the new production should be sold to Europe, which is expected to increase its LNG imports from 121MT to 147MT between 2023 and 2025, respectively.

ASEAN volumes

“But ASEAN, Australia’s closest export market, will likely be the second-largest source of demand growth as Vietnam and the Philippines start importing LNG, with total ASEAN demand rising by 11MT over the outlook (two-year) period,” added the report.

The report explained that despite the favourable environment for LNG producers, the outlook for Australia was mixed.

“Australian LNG exports are forecast to fall marginally, as existing facilities face difficulties back-filling their operations with gas from new reserves,” said the report.

“At the same time, investment in offshore exploration remains low despite high commodity prices, which could impact Australian gas production beyond the outlook period,” it declared.

Woodside Energy, the Western Australian LNG plant operator and oil and gas producer, posted total annual sales revenues of US$16.85 billion compared US$6.97Bln in 2021 as prices soared and progress was made on LNG and oil growth projects.

Australian LNG operator Santos delivered a doubling of annual LNG sales revenues while advancing expansion plans in Australia and Papua New Guinea as prices rose with increasing demand even amid an Asia-Pacific economic slowdown.

Australian LNG exports reached a new record of 81.4 million tonnes in 2022 and the export revenue increased by 86 percent year-on-year to A$92.8 billion (US$63.4Bln) in the 12 months to the end of December because of much higher prices and Australia appeared to tie in volume terms as World No. 1 exporter along with Qatar and the US.

The Australian Government said its LNG export revenues are forecast to reach A$90 billion (US$60.2Bln) in 2022–23 on record high global energy prices and a lower Australian dollar.

Asian LNG imports generally declined in the first half of 2022 with rising gas prices curbing demand in the Japanese and South Korean electricity sectors, while a combination of high spot prices and ongoing Covid-19 lockdowns reduced gas consumption in China.