LNG

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.

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.

Origin Energy, a shareholder in the Australia-Pacific liquefied natural gas export project in Queensland with ConocoPhillips of the US and Chinese major Sinopec, reported a year-on-year jump in the plant’s LNG revenues because of the higher effective oil price.

Origin said it received A$943 million (US$649.7M) in cash from APLNG in the past fiscal year.

The APLNG project’s full commodity revenue was up 36 percent at A$2.78Bln (US$1.91Bln) compared with A$2.05Bln in the previous year.

Origin also said its average LNG price in the quarter to the end of June was US$9.13 per million British thermal units.

Origin said its share of LNG volumes from its 37.5 percent stake in APLNG had fetched a 4 percent higher average price in the quarter compared with last year’s US$8.99 per MMBtu, though 14 percent lower than the previous 2019 quarter’s US$10.84 per MMBtu.

The APLNG plant produces almost 9 million tonnes per annum from two Trains and 7.6MTPA is contracted to Sinopec, whose formal name is China Petroleum & Chemical Corporation.

Sydney-based Origin said its share of production from the APLNG plant on Curtis Island was 799,800 tonnes in the quarter, a 12 percent rise on the 711,900 tonnes taken in the year-ago quarter.

Origin’s annual share of LNG offtake was 3.24 million tonnes, just 1 percent higher than 3.20MT it received in the previous year.

The company’s LNG revenues were 21 percent higher than the year-ago quarter at A$553.7 million compared with A$456.4M in the same three months of 2018, though 20 percent lower than the previous 2019 quarter when revenue was A$688.8M.

Origin runs two divisions, Integrated Gas, including upstream coal-seam gas for LNG, and Energy Markets, its gas and electricity retail and wholesale business.

APLNG’s production remained stable in the past year despite planned upstream maintenance outages.

“JCC (Japanese LNG) prices recovered in the June-19 quarter, largely driven by OPEC supply cuts and supply outages in Russia,” said Origin.

“Spot LNG prices continued to soften in the quarter, driven by additional supply from new projects and subdued demand growth,” it added.

LNG production decreased 4 percent compared with the previous quarter, driven by an increase in gas being directed to the domestic market.

Total fiscal-year oil and LNG hedging and trading costs for Origin amounted to A$199M

Quarterly domestic gas revenue increased by 19 percent compared with the previous quarter and revenue was up 6 percent for the fiscal year.

In Energy Markets, annual electricity volumes decreased 3 percent due to lower customer accounts and usage.

“Australia Pacific LNG continues its strong operational and financial performance,” said Origin Chief Executive Frank Calabria.

“Revenue was up 36 percent on the prior year driven by higher effective commodity prices which translated to A$943 million of cash flow to Origin,” added the CEO.

“Pleasingly a number of APLNG gas supply contracts were signed during the quarter with domestic manufacturing customers,” he stated.

Origin also expects the A$231M sale of the Ironbark gas assets to APLNG to be completed in August.