LNG exports post $1.9bn record

Australian gas exports have stepped up dramatically in recent months.

The export surge comes as Australia’s $200bn of boomtime investment starts to pay off

Australian liquefied natural gas exports have stepped up dramatically in recent months, with the second of three LNG trains at the massive Gorgon plant in Western Australia reaching almost full ­capacity and ­exports jumping from Gladstone as Origin ­Energy’s Australian ­Pacific LNG plant nears full output.

The nation logged record LNG export revenues of $1.9 billion in November, despite international oil prices, on which LNG contracts are based, remaining depressed.

The export surge comes as Australia’s $200bn of boomtime investment starts to pay off, ­setting the nation on a trajectory to become the world’s biggest LNG exporter, with about 80 ­million tonnes of annual capacity by the end of the decade.

But it also comes amid low contract prices and the threat of intensifying competition from a new entrant, the US, which BP believes will eventually overtake Australia as the world’s biggest exporter — and where President Donald Trump has pledged to support more shale gas production.

On Friday in the US, Chevron chief John Watson revealed that the second train at the $US54bn Gorgon plant at Barrow Island had accelerated by industry standards, after a trouble-plagued start-up of the first train.

“Learnings from train 1 were applied to train 2 and, consequently, train 2 ramped up over 90 per cent of capacity within a week and continues to exceed expectations,” Mr Watson told investors on a fourth-quarter earnings ­conference call.

“Train 3 is also expected to benefit — construction is complete and we’re well into start-up and commissioning and we expect first LNG early in the second quarter.”

Gorgon will produce 15 million tonnes of LNG a year from its three trains. Strong output from the APLNG plant at Gladstone is also expected tomorrow when Origin reports December quarter production.

Gladstone Port statistics show LNG exports from the Queensland harbour jumped from 1.5 million tonnes in October to 1.75 million tonnes in December from the three big LNG plants now ­operating on Curtis Island.

Australian Energy Market ­Operator data show that APLNG, which is operated by a joint ­venture between ConocoPhillips and Origin, has nearly doubled its gas intake since September, just before the second of APLNG’s two trains started.

And between July and November, monthly Australian LNG ­revenues grew from $1.39bn to $1.9bn, according to the Bureau of Statistics. While the surging ­exports are good news for the LNG companies and Australia’s balance of trade, they are likely to fuel some criticism.

On the east coast, domestic gas buyers have been calling for action on high prices amid concerns of shortages as the big plants suck up gas from as far away as Bass Strait and force locals to compete with international buyers.

And concerns over a lack of government revenue flowing from the $200bn investment boom because of the high construction costs, which the LNG projects will be able write off, have spurred Scott Morrison to announce a review of the tax by Treasury, which aims to report back by April.

A cold-weather driven boost in Asian LNG spot prices in recent months has benefited the small amount of uncontracted Australian cargoes that have been making it to market. But it has also drawn cargoes from the US, which only started exporting last year, underlining the threat from low-cost shale gas, which could drag down global prices.

In BP’s latest global energy outlook, released late last week, the oil giant predicted the US would become the world’s biggest LNG producer, producing about 18 billion cubic feet of LNG per day by 2035 (144 million tonnes). This is up from a forecast of 14bcf/d in 2015 and compares to its forecast for Australia of 17bcf/d, or 130 million tonnes a year.

For Australia, this still represents huge LNG growth, indicating BP thinks there will be another 50 million tonnes of ­capacity, beyond that already in production or under construction, added here before 2035.

Mr Watson said long-term LNG demand remained healthy.

“If you look at some of the ­environmental objectives, particularly throughout Asia, it’s ­actually some encouraging signs,” he said. “I temper that with the understanding that we’ve got projects that are coming online, but the long-term trend for LNG demand is good because it’s ­competitive on price in many locations and it certainly has desirable environmental characteristics.”