Australia planning to import LNG
MELBOURNE: Australia is on the verge of becoming the biggest exporter of liquefied natural gas, with dozens of tankers a week carrying fuel to North Asia. It could also soon be importing LNG as supply sources in its southern states run out.
Five LNG import projects are vying to start up between 2021 and 2022, possibly forcing gas users in New South Wales, South Australia, Tasmania and Victoria into more direct competition with Asian buyers for gas from northern Australia.
Those states represent a yearly market of 420 petajoules (PJ), equivalent to 7.8 million tonnes of LNG worth about US$3 billion. That represents just two per cent of global LNG trade, but import proponents say the terminals would be another key outlet for spot cargoes of the fuel, especially during periods of low demand in the northern hemisphere.
Piping gas from Queensland in northern Australia to southern markets is expensive, making LNG imports potentially viable.
Credit Suisse analyst Saul Kavonic says, though, if final investment decisions are delayed into 2020, the case for imports will weaken as pipeline tariff reforms are likely by then.
“Based on the five proposals to date, Australia now appears to be planning to overbuild LNG import capacity in response to an overbuild of LNG export capacity,” Kavonic said.
Eastern Australia has ample gas reserves to meet demand. The market outlook is tight, though, due to falling output from Exxon Mobil’s and BHP Group’s Gippsland Basin joint venture off Victoria, rising production costs and state restrictions on onshore drilling.
“We definitely would see a rationale for one terminal to give another source of gas into the east coast market,” said Nicholas Browne, Asia gas and LNG director at consultancy Wood Mackenzie. “We think one terminal would be sufficient till the mid to late 2020s.”
Import advocates need to be wary, however, of potential government moves to divert gas from exports to the domestic market and approvals for two long-delayed local gas projects, Narrabri and Surat. Gippsland Basin output could also prove more resilient than expected.
AGL’s Crib Point project is the most likely to go ahead, industry executives and analysts say. Australian Industrial Energy’s (AIE) Port Kembla terminal is also possible, but that hinges on signing up industrial customers.
Two other projects - Newcastle LNG, led by privately owned South Korean firm EPIK, and Venice Energy, set up by former executives of BHP Group now at Integrated Global Partners - have yet to submit applications for state approvals.
Newcastle LNG and Venice Energy are looking to limit commercial risk by building import terminals and charging suppliers and traders to regasify LNG to sell to customers.
“We aim to provide a costefficient infrastructure solution in markets that are in need of gas,” said EPIK founder Jee Yoon.
Australian LNG producer Woodside Petroleum said gas for such pay-per-use terminals could come from Australia, the United States,
Based on the five proposals to date, Australia now appears to be planning to overbuild LNG import capacity in response to an overbuild of LNG export capacity. Saul Kavonic, Credit Suisse analyst