Australia’s LNG sector has been a global behemoth for many years now, with the commodity consistently holding its position as one of country’s top five exports.

The sector recorded export revenue of $48.6bn in 2019 before plummeting 25% in 2020 to just $36bnn due to the impact of the COVID-19 pandemic, which saw oil prices collapse.

This is due to most Australian LNG exports being committed to long-term exports that are linked to oil prices.

However, higher exports and stronger international energy prices have led consultancy EnergyQuest to estimate that LNG has recovered most of the ground it lost in 2020 with export revenue in 2021 estimated at about $48bn.

This is on the back of record exports of 80.9 million tonnes, higher than the 77.6Mt exported in 2019, which could take Australia back up to the top of the world’s LNG exporters.

However, this might mark the peak of the sector’s performance.

It’s all downhill from here?

EnergyQuest has forecast that we are unlikely to see such high levels of LNG production in the future due to the natural decline in gas fields that feed existing projects and the limited number of new projects due to the move away from fossil fuels and deferments on investments caused by the impact of COVID-19 in 2020.

Of the two new projects announced last year, Santos’ Barossa will back fill its Darwin LNG project while Woodside’s Scarborough project will underpin development of Pluto Train 2.

EnergyQuest noted that while these projects are due to start producing LNG in 2025 and 2026 respectively, the Bayu-Undan field that currently supplies Darwin LNG is expected to be exhausted by 2023 (unless a current drill program proves successful) while production gains at Scarborough are expected to be offset by declines in North West Shelf LNG production.

The consultancy expects that in the best case, all these projects will do is bring Australian production up to around current levels and are unlikely to take it up to new levels, which would require new sources of gas to turn around the decline in the NWS.

It is certainly not helped that Shell’s Prelude LNG project was shut down by the National Offshore Petroleum Safety and Environmental Management Authority (NOPSEMA) in late November due to safety concerns.

The new king of the hill

Even if Australia can maintain its production levels, its rivals are already gunning for its crown.

Current runner-up Qatar has big plans to crank up its production from the current 77Mtpa up to 110Mtap by 2026 but the signs are pointing to the US taking the top spot this year.

The US Energy Information Agency has flagged US LNG production will hit 11.5 billion cubic feet per day in 2022, or about 83.95Mtpa.

Expansions are expected to take US up to the top spot and keep it there until 2025 when Qatar’s big expansion drive takes effect though further US developments could keep it ahead of its Middle Eastern competitor.

China grabs the LNG chug jug

At the other end of the supply chain, China has replaced Japan as Australia’s largest LNG buyer due to the rapid growth in demand for natural gas.

China imported 32Mt of LNG from Australia, up 7.1% from 2020 with all projects save Prelude delivering cargoes to the country.

Australia also exported more LNG to South Korea and Taiwan while deliveries to Japan were down 9.3% on 2020 due in large part to the expiry of existing long-term contracts with NWS and Darwin LNG.

These lost Japanese sales were effectively replaced by spot sales at much higher prices due to ongoing concerns about gas supplies in Europe.

While Asian spot prices are still considerably lower than European prices, it still goes for more than US$33 per million British thermal units, well above the US$8/MMBtu to US$9/MMBtu about a year ago.