There are early signs of recovery in Australia’s liquefied natural gas (LNG) sector with Asian customers paying slightly more for cargoes shipped in July, although year-on-year volumes are still down.
LNG shippers in Australia exported 85 cargoes in July, equal to 5.8 million tonnes, and steady on June’s level, but down from 102 cargoes and 7 million tonnes in July 2019, advisory firm EnergyQuest said in its latest snapshot of the industry.
July’s export volume for Australian LNG works out to 68.7 million tonnes on an annualised basis, according to EnergyQuest.
Fewer cargoes were delayed in July at 21, compared with 33 shipments in June, and 41 in May, its July update said.
Australia is the largest shipper of LNG cargoes in the world.
China eases demand for cargoes
LNG customers in China, Japan and Korea received 77 Australian cargoes in July 2020, down from 90 shipments in July 2019.
“There were 10 fewer deliveries to China, one less delivery to Korea, and two fewer deliveries to Japan,” EnergyQuest said.
Shipments increased marginally in July from Australia’s west coast LNG exporters to 4.2 million tonnes on 61 cargoes, from 59 cargoes and 4.1 million tonnes in June.
On an annualised basis, west coast shipments are running at 49.6 million tonnes, which is 79 per cent of export capacity.
Eastern Australian shipments of LNG declined to 1.6 million tonnes on 24 cargoes in July, compared with 1.7 million tonnes on 26 cargoes in June.
Small uptick in gas prices
Asian market prices for Australian LNG cargoes for shipping in August traded slightly higher at $US2.70 ($3.79) per million British thermal units, up from $US2.15/MMBtu for July cargoes.
LNG cargo prices are expected to rise further for September shipment to $US3.19/MMBtu.
Lower prices for Australian shipments have had a significant impact on export earnings.
EnergyQuest said Australian LNG export revenue “decreased significantly” in July to $1.98bn, down from $2.98bn in June, and representing a fall of 52 per cent on July 2019.
“The decrease in revenue is a result of the lower export volumes seen during July and a significantly lower lagged oil price,” EnergyQuest said.
Lower oil prices, which gas prices tend to follow, are having a significant impact on Australia’s LNG industry. They have led to extended maintenance to export facilities, customers deferring cargoes, and asset write-downs.
Domestic prices offset weak export market
Australian energy and gas company Origin Energy (ASX:ORG) said that increased sales of gas in the domestic market had partially offset lower spot prices and volumes for export gas.
Origin achieved an average price for its gas of $10.21 per gigajoule, comprising an average LNG price of $US8.80/MMBtu ($12.72/GJ) and an average domestic gas price of $4.90/GJ.
In an August update, gas producer Central Petroleum (ASX:CTP) said its annual sales volumes and revenues reached record levels of $65m despite “challenging market conditions in the second half-year”.
Sales for Central Petroleum’s gas were 14 per cent higher year on year in the 2020 financial year at 12.3 petajoules equivalent, the company said.
Central Petroleum said it believed market conditions for gas would improve within two years.
“We expect weak spot and as-available gas markets to continue through 2020, but see the market for firm, long-term gas sales being resilient, particularly in relation to gas supply from 2022,” managing director and CEO Leon Devaney said in its June quarter update.