By Nick Toscano
Australia’s largest energy exporters are facing falling revenue as weak demand and healthy stockpiles send benchmark prices for liquefied gas cargoes in Asia sinking towards their lowest levels in nearly two years.
Prices for one-off deliveries of liquefied natural gas (LNG), one of the nation’s most lucrative exports, reached unseen highs late last year after Russia’s invasion of Ukraine deepened a historic energy crisis and unleashed a global scramble for supplies, but they have been falling sharply ever since.
An LNG tanker berthed in Futtsu, Japan.Credit: Bloomberg
While prices remain relatively robust by historical standards, analysts are suggesting that record prices fetched during the December quarter of 2022 would be “as good as it gets for Australia’s LNG industry”.
“This has played out with falling prices and revenues in the first quarter of 2023,” said Rick Wilkinson, head of Australian energy consultancy EnergyQuest.
S&P Global Platts’ Japan-Korea Marker – the benchmark for spot LNG in North Asia, where the bulk of one-off Australian gas shipments are sold – fell 33 per cent from the December quarter to an average of $US26 ($39) in the three months to March, and is now trading below $US11 per million British thermal units.
The sliding prices drove Australia’s LNG export revenue lower, even as producers of the super-chilled fuel delivered a record opening quarter for production volumes.
Australian gas giants Woodside and Santos, which made more money in 2022 than in any year in their history, have reported first-quarter revenue falls of 16 per cent and 13 per cent respectively.
In a new report, EnergyQuest calculates that Australia’s overall first-quarter LNG revenue was $22.6 billion – down 20 per cent from $27.6 billion in the December quarter, but up from the $17.8 billion compared with the first quarter of 2022.
This year’s reductions to LNG and oil price forecasts have prompted investment houses to slash earnings targets for some of Australia’s largest energy producers.
However, some analysts are betting that competition for spare cargoes will intensify in the second half of the year, especially if a hot summer in the Northern Hemisphere increases demand for the fuel to power air-conditioners.
“We see seasonal low Japan-Korea Marker spot LNG pricing improving from here,” Royal Bank of Canada energy analyst Gordon Ramsay said. “A warmer-than-average northern hemisphere summer or colder-than-average northern hemisphere winter have potential to add further LNG pricing support.”
As Russian gas pipeline flows remain curtailed, maximum European gas storage levels ahead of the coming winter would only be able to satisfy 25 per cent of consumption, Ramsay added, and would not “fully avert an energy crisis”.
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