LNG

Beach Energy Ltd, the Australian company involved in the Waitsia LNG export project in the onshore Perth Basin of Western Australia and in other natural gas ventures in South Australia and New Zealand, has embarked on a strategic review involving job losses and an executive overhaul.

Australian energy company Santos reported solid annual and quarterly earnings with steady cargo flows from Gladstone LNG in Queensland and from Papua New Guinea while legal hold-ups were removed to push forward with bringing new feed-gas to Darwin LNG from where only one cargo was shipped in the fourth-quarter.

Global natural gas prices remained flat even as Australian labor unions prepared to have all-out strikes from September 14 at the Gorgon and Wheatstone LNG export plants as mediation talks were still taking place in Perth in Western Australia.

Woodside Energy, the leading Australian oil and gas company and LNG operator in the state of Western Australia, has criticised Federal Government moves to intervene in the Australian natural gas market, including with the imposition of price caps, and said the action was likely to make matters worse.

Australia shipped fewer liquefied natural gas cargoes in January than it did in the previous month with demand ebbing in North Asia as inventories grew and spot cargo prices increased, though the rise of European values did not attract any Australian shipments.

AGL Energy, the leading Australian gas and power supplier forced to cease any further development of the proposed Crib Point LNG import project in the southern state of Victoria, has signed pipeline natural gas supply agreements with Cooper Energy.

Australia exported a record 79.1 million tonnes of LNG in the 12 months to June 2020, up 5.9 percent from 74.7MT a year earlier while domestic gas consumption grew on both the East and West coast markets in the second quarter in contrast to the experience during Covid-19 across most of the developed world.

Australian domestic gas consumption on the East Coast was 7.7 petajoules higher quarter over quarter in the second three months of the year, according to the monthly report from consultants EnergyQuest.

“Gas-use-for-power (GPG) was down by 5.9 petajoules in the quarter, though other gas-use (residential, commercial and industrial) increased by 13.6 petajoules with increases in all states except New South Wales,” said the report.

EnergyQuest noted that as one of the world’s major LNG producers Australia is to some extent becoming a price-maker
in relation to spot prices.

The Platts Japan-Korea Marker has increased from US$2.15 per million British thermal units at the start of July to US$4.66 per MMBtu on 4 September.

“This coincides with unexpected outages at the Western Australian Gorgon LNG project due to the shut-downs for repairs,” said the report.

The national regulator, the Australian Competition and Consumer Commission publishes East Coast netback gas price estimates based on the Platts JKM.

This means that unexpected developments in Western Australia that affect spot prices will directly feed in to East Coast netback
estimates and possibly East Coast prices.

“To this degree any domestic contracts indexed to LNG spot prices will be hostage to unexpected shutdowns by West Coast projects, as well as projects elsewhere in the world,” EnergyQuest explained.

The overall Australian LNG export market followed the rest of the world on the score that towards the end of the year the industry began to buckle under the weight of a global glut of the fuel.

Production of LNG in the second quarter of 2020 fell to 19.1MT, the lowest since the third quarter of 2018. 

In July. Australian projects shipped a total of 5.8MT (85 cargoes), only marginally lower than 5.9MT (85 cargoes) in June, but well below the record level of 7.0MT in December 2019.

“From May onwards, the effects of Covid-19 on Australian LNG (in an already oversupplied LNG market) began to hit home,” said the report..

“Projects began extending maintenance periods to rein in production and experienced cargo deferrals. Of the 85 Australian cargoes shipped during June, 33 cargoes were delayed during the month,” it added.

The immediate impact on LNG price realisations was mixed.

Producers such as Woodside Petroleum, operator of the North West Shelf and Pluto LNG export plants, with a relatively high proportion of spot cargo sales, felt the biggest price impact.

However, the East Coast Australia-Pacific LNG facility and the Santos-run Gladstone LNG saw out the full year to end-June 2020 with little deterioration in realized prices.

Total export revenue for the year to June was A$47.8 billion (US$34.8Bln), down only 3.8 percent from a year earlier.

However, the negative impact on prices and revenues was accelerating thereafter.

Export revenue in the second quarter of A$10.5 billion was down 16.1 percent from $12.6 billion in first quarter.

“Queensland’s LNG projects finished the financial year strongly. All three projects shipped record tonnages in FY 2020,” said the report.

“Queensland LNG export revenues were steady at A$4.16 billion between Q2 2019 and Q2 2020 and up slightly from the first quarter. However, revenues are likely to have turned down from July,” it added.

The latest round of quarterly reports by Australian oil producers laid bare the full effect of the pandemic-led collapse in oil prices.

Realised oil prices for Woodside Petroleum, which emerged in Q2 2020 as the country’s largest oil producer, plunged to US$31 per barrel in the second quarter of 2020, down 55 percent from US$69 per barrel in the same period of 2019.

“The latest price was also down sharply from Woodside’s average realised price of US$52 per barrel in the first quarter of 2020,” said the report.

“The country’s second and third largest oil producers, Beach Energy and Santos, suffered a similar fate to Woodside,” it added.