Australia's LNG exports expected to decline to 79 mil mt in FY 2024-25

Australia's LNG exports are expected to decline to 81 million mt in financial year 2023-24 (July-June) and 79 million mt in FY 2024-25, from 82 million mt in 2022-2023, a report from the Department of Industry, Science and Resources said, reflecting halted or declining production at certain facilities in the country and slow demand from some of its top customers in Asia.

Exports in FY 2022-23 would likely be hurt as Darwin LNG suspended production while being backfilled from the Barossa field and lower North West Shelf output was likely to weigh on 2024-2025 volumes, the Department said in its latest Resources and Energy Quarterly, or REQ, report Oct. 3.

However, production was likely to be supported in longer term as several projects have been underway.

Such facilities include Woodside Energy's Scarborough Gas Project, which will provide additional feedgas to Pluto LNG's second liquefaction train, Santos' Barossa Gas Project, which will backfill Darwin LNG, Inpex's Ichthys upgrade, which will boost its output, and Tamboran Resources' recently proposed Northern Territory LNG facility, the report said.

Earnings were expected to drop to A$71 billion in FY 2023-24 and A$63 billion in FY 2024-25, from A$93 billion ($58.6 billion) in FY 2022-23, according to the report.

However, higher oil prices were likely to temper the impact of lower commodity prices, including expectations of lower Asian spot LNG prices, in the coming years and support earnings, as about 80% of Australian LNG exports are sold under long-term contracts that link the price of LNG to the Japanese customs cleared crude oil price, the report said.

Asian spot LNG prices volatile

Asian spot LNG prices were likely to be volatile until 2025 and expected to rise to $15/MMBtu over the December quarter as winter heating demand rises, the report said.

Platts, part of S&P Global Commodity Insights, assessed November JKM at $12.92/MMBtu on Oct. 3.

"However, there remains a distinct possibility that once European inventories are full, global markets will experience a temporary glut until the seasonal conditions change," the report said.

"Beyond the upcoming winter, prices are forecast to average $15/MMBtu in 2024 (assuming normal Northern Hemisphere winter conditions) before easing in 2025 to $13/MMBtu, as new liquefaction facilities come online in the US."

Asia's LNG appetite

Weakening economic prospects among some of Australia's LNG customers in Asia and increasing reliance on renewables could hurt LNG demand.

Australia remains China's largest source of LNG. In FY 2022-23, Australia exported an estimated 22 million mt of LNG to China, down 25% year on year, the report said.

However, China's LNG outlook was expected to be stable through 2025 around 70 million mt, as a larger proportion of Chinese gas demand was likely to be serviced by pipeline imports from Russia, the report said, noting that flows along Russia's Power of Siberia 1 pipeline were expected to peak at 24 billion cu m/year in 2024. Slower economic growth could weigh on the country's overall gas demand.

Australia is Taiwan's largest supplier of LNG, accounting for over 40% of its LNG supply, the report said. Most LNG is used for power generation and has been forecast to rise to 23 million mt in 2025 as new gas-fired generation capacity replaces nuclear power under Taiwan's long term decommissioning plan.

Australia is also Japan's top source of LNG, accounting for 40% of LNG imports since 2020, according to the report.

Japan's total LNG imports have been forecast at 73 million mt in 2023 and were expected to remain at that level through 2025 as gas-powered generators face increased competition from nuclear and coal-fired power.

Australia accounts for about 25% of South Korean LNG imports and has been its biggest supply source since 2020. The report forecast South Korea's total LNG demand relatively stable at 41 million mt annually through 2025.

The South Korean government's emphasis on renewables and support for nuclear power and hydrogen could lead to the share of LNG decreasing to 23% by 2030, from 29% in 2021.