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Australia set to become world's biggest exporter of natural gas

Australia set to become world's biggest exporter of natural gas article image

Australia is expected to become the world’s biggest natural gas exporter by next year as huge projects near completion, reports Business Insider.

According to the latest quarterly resources outlook from the chief economist at the federal department of industry, innovation and science, the title is likely to be somewhat short-lived, however, as US exports ramp up over the following years.

The report said Australia was likely to overtake Qatar as the biggest gas exporter, before the US assumes the mantle in the mid-2020s.

“Australia’s LNG export volumes are forecast to reach 77 million tonnes in 2018-19, up from 52 million tonnes in 2016-17,” the report said.

“Higher export volumes will be driven by increased production at Gorgon, as well as the completion of the three remaining LNG projects under construction – Wheatstone, Ichthys and Prelude.”

Qatar – currently the world’s largest exporter of natural gas – exported 74 million tonnes in 2016, and volumes are expected to remain little-changed over the forecast period to 2019.

Second biggest resources export

Rising export volumes mean natural gas is set to become the second biggest Australian resources export by dollar value 2019, overtaking metallurgical coal.

That increase will help pick up the slack from a projected $10 billion decline in iron ore — Australia’s biggest export — based on reduced Chinese demand.

The majority of Australia’s gas exports will be based on contracts derived from the price of oil, rather than spot prices.

“The price of Australian LNG (FOB) is forecast to increase to average $9.0 a gigajoule in 2018–19, largely driven by higher prices on oil-linked contracts,” the report said.

“The recent increase in oil prices should begin to flow through to Australian LNG prices around early 2018.”

Long term prediction

Conversely, spot prices in Asia are expected to decline as buyers unwind purchases of gas stockpiles for the winter months.

Longer term, the report cited the International Energy Agency’s New Policies Scenario, which forecasts that the US and Qatar will overtake Australia by 2040.

Five natural gas projects expected to commence construction in the US by 2019 are likely to make it the world’s biggest gas exporter by 2025. The projects a combined nameplate capacity of 64 million tonnes.

“LNG shipments from the United States are projected to reach 86 million tonnes in 2025 and 115 million tonnes in 2040,” the report said.

Price forecast

And Qatar’s huge natural gas resources leave it well placed to continue production expansion over the longer term, with the country recently lifting a moratorium on its huge North Gas field.

Despite huge investment in recent years, a projected lack of major second-wave projects in Australia mean it will fall behind the US and Qatar over a 20-year time frame.

“The price of Australian LNG (FOB) is forecast to increase to average $9.0 a gigajoule in 2018-19, largely driven by higher prices on oil-linked contracts,” the report said.

“The recent increase in oil prices should begin to flow through to Australian LNG prices around early 2018.”

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