Australia’s LNG shipments slump for the first time in years

An eight-year growth streak for Australian liquefied gas exports that turned the nation into one of the world’s biggest shippers of the fossil fuel has come to an end as production fell last year for the first time since 2015.

Australian cargoes of liquefied natural gas (LNG) – gas that is super-chilled to the point it becomes a liquid and can be transported on specialised ships – soared to a record-breaking 81.2 million tonnes in 2022, before declining to 80.7 million tonnes in 2023, new figures from energy consultancy EnergyQuest reveal.

LNG has boomed to become one of Australia’s most lucrative exports– but its long-term future is less certain.Credit: Glenn Campbell

It marks the first year-on-year drop in LNG output since 2015, when production began ramping up on the back of investments in huge LNG export ventures involving ASX-listed Woodside and Santos, and global operators such as Shell and Chevron. By 2020, Australia’s LNG shipments had surpassed those from the United States and Qatar.

However, existing oil and gas fields across Australia are drying up due to natural declines, and a limited pipeline of new fields being developed means production has likely peaked.

EnergyQuest chief executive Rick Wilkinson said low levels of investment in further exploration meant there were insufficient new sources of supply to fill the gap.

“Since the Albanese government came to power, no offshore exploration acreage has been awarded – the latest acreage release was for 2022, with bids closing on March 2, 2023,” Wilkinson said.

“Those bids are still under consideration … there was no 2023 round at all, and it remains to be seen whether 2024 will see a release.”

While Australia’s LNG boom has benefited gas companies and is still delivering tens of billions of dollars in yearly export revenue, the growth of the industry has become a cause of significant environmental concerns because it is a key source of greenhouse gas emissions, including carbon dioxide and methane, which scientists warn must be urgently reduced to combat the worst impacts of global warming.

Proponents of gas say it is the necessary “transition” fuel in the transition to clean energy – a power source with half the typical life-cycle emissions of coal, that can still be reliably called on to back up renewables when the wind isn’t blowing and the sun isn’t shining. Gas is also a widely used feedstock in a range of manufacturing processes, such as making fertilisers, which do not yet have commercially viable green alternatives.

However, others, including powerful investors, are increasingly sceptical about the role of gas in a world that’s getting serious about ratcheting up climate action, electrification, and phasing out the consumption of all fossil fuels.

Despite Russia’s invasion of Ukraine in 2022 choking global energy supplies, boosting fuel prices and temporarily brightening the LNG demand outlook, there are questions about the longer-term viability of new and recently sanctioned gas projects across Australia.

An estimated 40 per cent of institutional investors in Australia are already applying some level of exclusion to new oil and gas projects due to concerns about long-term climate-related risk, according to the Investor Group on Climate Change, a coalition of superannuation and retail funds investing on behalf of 7.5 million Australians.

Still, many companies and their financial backers in the energy sector are betting billions of dollars that gas will continue to have a place in the mix until at least 2050, based on projections that - while consumption may have peaked in some regions - demand from Australia’s key buyers in Asia must keep rising to support economic growth.

Perth-based Woodside Energy is pressing ahead with the development of the $16.5 billion Scarborough project off the coast of Western Australia, which targets first gas production by 2026, while Adelaide-based Santos is pursuing the Barossa project north-west of Darwin.

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