No let-up in Qld's LNG exports despite east coast gas pressures

  • 18-Sep-2017
  • No let-up in Qld's LNG exports despite east coast gas pressures

Queensland's exports of LNG are being maintained at near-record levels while domestic prices softened only slightly in August, despite intense political pressure on producers to free up more gas for the east coast market.

The latest analysis from consultancy EnergyQuest? found spot gas prices in the eastern states have seen "some stabilisation" since earlier in the year, reflecting a loosening in the tightness that has been plaguing the market and has driven sharp price hikes for industrial customers.

Queensland's total LNG shipments from its three export ventures in Gladstone amounted to 1.7 million tonnes of LNG in August, just as much as in July.

The findings come as the government is due to decide within weeks whether to slap restrictions on LNG exports from Gladstone in 2018 by triggering the Australian Domestic Gas Security Mechanism (ADGSM).

The completion of performance testing at Origin Energy's APLNG project in late July was expected to lead to a reduction in exports from that venture as it held back from selling into the low-priced Asian spot LNG market. But EnergyQuest's analysis shows that while APLNG shipped two fewer cargoes in August than in July, that reduction was offset by an additional two cargoes being shipped from Santos's $US18.5 billion GLNG venture.

The three LNG ventures in Queensland have all responded to political pressure around east coast gas and announced measures they say will make more gas available locally. Those steps include a gas "swap" deal by Santos, and an agreement by GLNG to divert gas away from export and into the domestic market in 2018 and 2019.

The measures have essentially removed an expected shortfall of about 100 million cubic feet a day in the eastern Australian gas market between 2017 and 2021, according to consultancy Wood Mackenzie, although senior analyst Matt Howell is not ruling out the government still triggering LNG export caps for 2018.

"We now keenly await what the federal government will do next, as it would be tough to argue that the market will have a shortfall in 2018," Mr Howell said.

"But, despite the efforts taken by industry, the short-term political gain of having a tough stance on industry may lead to the ADGSM being triggered anyway.'

Wood Mackenzie has also said it does not expect that imposing limits on LNG export would in any case result in increased domestic supply of gas. It bases its reasoning on the fact that the policy places no requirements on GLNG, the venture that would be affected, to supply the gas that it is not allowed to export into the domestic market instead.

EnergyQuest found that Queensland's LNG shipments have been "relatively flat" all year, averaging 25 cargoes a month. Yet it noted that spot prices for gas on the east coast fell modestly in Sydney, Adelaide and Melbourne in August and that the net movement of gas along the coast continued the trend started in June-July where gas is now flowing south and west, rather than being sucked north to Gladstone.

Spot prices fell by less than $1 a gigajoule in the three southern capitals to $8-$9/GJ but are still about $2/GJ higher than in August last year, EnergyQuest said.

The consultancy also compared domestic gas prices with "netback" LNG export prices and found it would be more profitable for the Queensland LNG venture to sell gas domestically than as spot LNG in Asia. However the same was not the case for LNG sold under long-term sales contracts priced against crude oil prices, where oil-linked netback prices were slightly above east coast spot prices.

Meanwhile, total Australian LNG shipments fell slightly to 5.1 million tonnes in August, from 5.4 million tonnes in July, due to lower output from Chevron's Gorgon project and Woodside Petroleum's Pluto venture, EnergyQuest said.

Gorgon and the North West Shelf venture dominated total production, shipping 43 cargoes between them, more than half the total shipped by Australia last month.

The consultancy noted that Chevron's $US34 billion Wheatstone LNG project, in which Woodside has a stake, is "getting close" to its first LNG cargo, which is now expected in early October. Chevron has scheduled the Asia Venture LNG tanker to arrive at Wheatstone on September 24 to export the maiden cargo, it said.

Chevron had been targeting mid-2017 to begin production from Wheatstone after delaying the start-up from late 2016.


Source:-Afr.com

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