US-China tariffs boost Australian LNG sector
AUSTRALIAN liquefied natural gas producers are set to cash in on China’s plans to slap tariffs on US exports of the fuel and feedstock.
Any reduction in new US gas projects should also help Woodside Petroleum get its multi-billion dollar Browse and Scarborough projects in West- ern Australia up and running, the investment bank has said.
China plans to levy a 10 per cent duty on LNG from America from September 24 in response to the US imposing tariffs on $US200 billion of Chinese imports earlier this week.
The move will likely dent US exports and boost the prospects for low-cost suppliers like Australia, the world’s second largest LNG producer, along with Papua New Guinea and Qatar.
“Australia’s LNG sector will benefit from the Chinese tariffs on US LNG, as Australia will be more competitive on price compared to US LNG with the tariffs in place, and moreover Australia will be seen as a lower political risk source of LNG supply longer term,” Credit Suisse analyst Saul Kavonic said. The tariffs could also boost Asian LNG spot markets, which receive small volumes from Chevron’s Gorgon project off WA and Origin Energy’s Australia Pacific LNG project at Gladstone.
A push by Beijing to prioritise the use of gas over coal for its power generation has helped drive global demand for the fossil fuel with China on track to become the world’s top LNG importer next year, according to the International Energy Agency.
Buyers in China are likely to put off striking deals for US LNG given the heightened risk profile, Mr Kavonic said.
“We would expect Chinese buyers to pivot the emphasis in both their short and long term LNG procurement strategies away from US supply, to places such as Australia,” he said.