US emerges as Australia’s new rival for LNG exports
Australia has suddenly gone from first to third in the league table of the world’s biggest LNG exporters as a major new rival emerges.
The US has exported more LNG than Australia for the first time on record, marking a major new commodities rival and underscoring heightened competition among producers to win market share with Asian gas buyers.
LNG output from the US jumped to 6.75 million tonnes in May spread across 95 cargoes, making it the second-largest global exporter behind Qatar and dumping Australia into third spot for the month, Bloomberg data shows.
With access to cheap gas supplies, the US is starting to deliver on its vast resources. It was responsible for all of the world’s new LNG production in 2020 – delivering 20 million tonnes of new output – with the nation now on track to overtake Australia on an annual basis and compete with Qatar as the biggest natural gas exporter in the world.
“Supported by abundant supplies of shale gas and growing liquefaction capacity, the US’s LNG exports experienced a meteoric rise,” the International Gas Union’s World LNG report said on Thursday.
“Numerous additional projects are looking to ride the second wave of US gas exports in another round of development.”
Six LNG export facilities have started operating on the Gulf coast with three more to start in the next few years, threatening Australia’s current pole position just ahead of Qatar.
Australia’s $200 billion LNG spending spree in the past decade catapulted the country to the top as the world’s largest gas exporter.
However, little appetite exists to bankroll new LNG projects. A lack of gas to fill plants such as the North West Shelf is one issue along with growing climate concerns and existing projects suffering cost blowouts and delays, trimming returns for investors. Australia’s trade tensions with China are also weighing on sentiment, potentially hobbling new deals.
Instead, Australia will rely on the expansion of existing projects such as Woodside Petroleum’s Pluto plant and Santos’s Darwin LNG facility to keep it competitive with the US and Qatar.
“With the great LNG build-out concluded in 2019, Australia now looks to projects to support current infrastructure, namely backfill projects to maintain feed gas supply to existing export projects,” the IGU report said.
The US and Canada account for two-thirds of the global LNG project pipeline by capacity while Australia has a potential 50 million tonnes annually or 5 per cent of the overall international tally.
While the US outperformed in May, it still has some distance before it regularly tops its two main competitors. The US shipped 44 million tonnes of LNG in 2020 compared with Australia and Qatar tied on 77 million tonnes each.
Japan, China and South Korea account for over half the world’s LNG consumption and remain the biggest market for Australian producers, with the US looking to muscle in on the same territory.
Still, Qatar has ambitions to turbocharge its supplies with plans to add an extra 42 per cent of capacity, taking its output to 110 million tonnes a year. Qatar Petroleum will add four LNG trains, each with 8.25 million tonnes of capacity, equivalent to more than twice the capacity of Australia‘s largest export facility, the North West Shelf LNG plant in Western Australia.
The main near-term prospect for Australia remains Woodside’s WA Scarborough gas development, which awaits sanctioning in the second half of 2021. UBS thinks that timeline could slip into 2022, however, given the gas giant will want to give its yet-to-be-appointed chief executive time to analyse the project and the company’s broader growth strategy.
“For us it was clear at their annual general meeting, the new incoming CEO will preside over the final investment decision on Scarborough being developed,” UBS analyst Tom Allen said.
“That naturally could introduce some risk the FID timing is delayed beyond the end of this year which Woodside are currently targeting. But we’re comfortable with a modest delay.
“We think it’s more important the new CEO gets the chance to review and influence the business case for the project.”
The Perth producer plans to process gas from its remote Scarborough field to prop up an expansion of its Pluto LNG project.