CEOs say that Asian prices will be much stronger through the 2021 first quarter
LNG News Editor:
Australian liquefied natural gas exporters are leading the revival in cargo trading into North Asia with rising oil-linked contract and spot prices along with ample supplies.
Woodside, the company with stakes in three Western Australian export plants, has just issued its third-quarter 2020 earnings and reported a more than 40 percent plunge in sales revenues to US$738 million from US$1.24 billion as the average realized LNG price dropped.
Woodside’s share of production at the various plants remained stable and came to 617,700 tonnes (550,9423 in 2019 quarter) at the North West Shelf plant, 1.20 million tonnes (1.21MT) at Pluto LNG and 317,351 tonnes (339,509) at Wheatstone LNG.
“The operating performance of our LNG facilities during the quarter was strong. Pluto again demonstrated high reliability, with LNG production climbing by nearly 4 percent compared with the second quarter,” said Chief Executive Peter Coleman.
“As expected, sales revenue in the third quarter was impacted by lower realised LNG prices, reflecting the oil price lag in many of our contracts,” Coleman explained.
“Pricing in the fourth quarter and in Q1 2021 is expected to be stronger given the improvement in the oil price in recent months,” he added.
“In particular, I am encouraged by the strengthening Asian LNG spot price, which is now above $6.50/MMBtu for December deliveries,” he stated.
Woodside’s percentage of produced LNG sold on a spot basis during the quarter was 26 percent and the full-year total is expected to be around 30 percent.
“Spot LNG cargoes are currently selling at prices equivalent to approximately 15 percent of the Brent oil price per MMBtu,” said Woodside.
Another Australian operator Santos, with stakes in two Australian plants and Papua New Guinea LNG, said the past quarter represented the “the trough for LNG prices”, with higher prices expected on oil-linked contract and Japan-Korea Marker spot prices through to the New Year.
Santos third-quarter LNG sales revenues dropped to US$252 million from $400M in the second quarter and $387M in the same three months of 2019.
The LNG projects involving Santos, Gladstone LNG in Queensland, Darwin LNG in the Northern Territory, and PNG LNG shipped 61 cargoes in the third quarter, of which 11 were spot cargoes.
The Santos average realised LNG price was significantly lower than the prior quarter at US$4.27 per million British thermal units, down from $8.27 per MMBtu in the second quarter and $10.04 per MMBtu in the same three months to September of 2019.
This reflected the linkage of sales contracts to a lagged Japan Customs-cleared Crude (JCC) price.
“Three-month lagged JCC averaged US$31/bbl in the third quarter compared to US$68/bbl in the second quarter,” said Santos.
The company said it still expected full-year 2020 LNG sales from the GLNG coal-seam-gas-to-LNG plant, which it operates, to be in the range of 5.9-6.1 million tonnes.
“Eighty-nine CSG wells were spudded and 107 connected across the GLNG acreage in the third quarter for a total of 246 drilled and 304 connected to the end of September,” said Santos.
Chief Executive Kevin Gallagher said the company had delivered another solid quarter, highlighted by record production and sales volumes, and another strong free cash flow result.
“Our disciplined, low-cost operating model continues to drive strong performance across our diversified asset portfolio,” added Gallagher.