Australian gas prices have halved on the east coast, here’s why
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Australian gas prices on the east coast have halved in August thanks to our insulation from the global spot gas market, the return of warmer weather in Australia, and the impact of COVID-19 lockdowns in Sydney and Melbourne.
Spot gas prices plunged from $14.45 per gigajoule in July to $8.68/GJ in Wallumbilla, Queensland while in the south, prices also fell from $16.64/GJ to $8.67/GJ in Sydney, $17.16/GJ to $8.81/GJ in Adelaide and from $15.35/GJ to $7.49/GJ in Victoria.
This comes as liquefied natural gas exports hit 7.18 million tonnes in August, just shy of the record 7.2Mt in March and up from the 6.81Mt of LNG shipped in July.
West coast LNG projects increased their shipments from 5Mt in July to 5.3Mt in August while the Gladstone projects saw shipment increase by 0.1Mt to 1.9Mt.
This is thanks to the significant growth in North Asian and European gas demand creating competition for LNG spot cargoes, particularly from the US and Qatar.
EnergyQuest noted in its August report that European prices are currently around US$19.62 ($26.85) per million British thermal units while Asian prices are averaging about US$18.74/MMBtu.
Gas stocks in Europe have been depleted by the last winter as well as this year’s extreme summer weather with demand currently at its highest level in five years, leaving its stockpiles about 20% below the seasonal average.
Asian demand is driven in large part by China’s strong economic rebound, demand from the summer weather and limits on coal usage. Both Japan and South Korea also imported more LNG.
However, Australian LNG projects have largely being unable to capitalise on the gain as they are already operating near capacity and on long-term contracts linked to oil prices rather than spot prices.
Just nine cargoes, five from the west coast and four from the east coast, were sold on the spot market.
On the west coast, Gorgon and Prelude are already operating at full capacity while the east coast still has a little room for growth with operations at 87% of nameplate capacity during August.