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The Australian government revised up Australia's LNG export price for the current and next fiscal years in it's latest Resources and Energy Quarterly forecast. LNG is forecast to overtake metallurgical coal as Australia’s second largest resource and energy export.

Australia LNG March 2018

The report is released quarterly by the Department of Industry, Innovation and Science.

Australia's LNG export unit value to average:

  • 2017-2018 (July-June) $7.80/MMBtu in fiscal, up from $7.30/MMBtu in the October-December report.
  • 2018-2019 forecast to rise $1/MMBtu to $8.20/MMBtu.
  • 2019-2020$8.20/MMBtu level to be maintained
  • 2020-2021 $8/MMBtu and $7.90/MMBtu easing back with overcapacity

The report expects that global LNG markets look set to move into a period of overcapacity, as Australia’s and United States’ LNG exports ramp up. The real value of Australia’s LNG exports is forecast to increase from $23 billion in 2016–17 to $39 billion in 2022–23, driven by higher export volumes and, to a lesser extent, higher prices.

LNG is forecast to overtake metallurgical coal as Australia’s second largest resource and energy export in 2018–19. The completion of the final three Australian LNG projects under construction will underpin strong growth in export volumes and bring total export capacity to 88 million tonnes. LNG contract prices at which most Australian LNG is sold are projected to increase gradually, in line with oil prices.

Most Australian LNG is sold into Asia on contracts linked to the price of Japan Customs-cleared Crude oil. "However, low LNG spot prices will play some role in constraining the average export price realized over the next few years, as Australian exporters increase their share of sales at spot prices," 

UPDATE From Cheniere Q1 Earnings Report:

LNG World Suppliers

Australia to overtake Qatar as world's largest LNG exporter in 2019.

The Department scaled back its 2017-2018 (July-June) forecast for Australian LNG exports from its previous quarterly by 1.4 million mt to 61.6 million mt, and by 2.4 million mt to 74.1 million mt for the next fiscal. Export volumes are then forecast to steadily increase each year to 78.9 million mt in 2022-2023.

"Higher export volumes will be driven by the completion of the three remaining LNG projects under construction -- Wheatstone, Ichthys and Prelude. The completion of these three projects will bring the combined nameplate capacity of Australia's LNG projects to 88 million mt," 

"While Australian LNG exports are projected to increase, the capacity utilization of Australian LNG export projects is expected to edge down as supply side competition increases over the next few years," 

The extent to which capacity utilization declines will depend on the flexibility that buyers have in their contractual arrangements with Australian exporters as LNG contracts often include clauses which allow buyers to reduce purchases to minimum take-or-pay levels. The flexibility with which buyers can reduce purchases on the contracts is likely to be important if oil-linked contract prices and spot prices diverge, encouraging buyers to reduce imports on contracts to minimum levels and boost spot market purchases.

USA, Australia and Russia All Ramping Up Supply

The major expansion of global LNG supply capacity currently underway, with around half of all new capacity to come from the US.

"By the end of 2019, all six LNG projects in the US are expected to have commenced operations, bringing the combined nameplate capacity of US LNG projects to 67 million mt,"

Russia capacity additions are expected over the next few years with the 16.5 million mt/year Yamal LNG project  which shipped its first cargo from the first of its three LNG trains in March 2018.

Chevron's Western Australia-based Wheatstone project is likely to be the first to be completed, with train 1 already in production and train 2 due to come online in the current quarter.

"Shell has indicated that the Prelude Floating LNG project will be completed between May and August 2018. First gas production at Inpex's two-train Ichthys project is expected to start in April or May 2018," 

There may also be further export capacity could be added later in the outlook period with Woodside having concluded feasibility studies for a capacity expansion at the Pluto project of between 0.7 million mt/year and 3.3 million mt/year.

The first expansion option -- debottlenecking -- would add just under 1 million mt of capacity. The second -- an off-the-shelf train that would plug-in to the existing infrastructure -- would add 1 to 1.5 million mt," the reported added. 

 

Source: Resources and Energy Quarterly

From a Sunburnt Country...

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