Australian LNG export value to drop with lower oil prices

Image courtesy of Woodside

The value of Australia’s LNG exports is forecast to decline to $49 billion in 2019–20 and fall back further to $44 billion in 2020–21, in real terms, driven by declining oil-linked contract prices.

Australia’s LNG export earnings are projected to remain in the $44 to $47 billion range, in real terms, over the remainder of the outlook period to 2024–25, Australia’s Office of the Chief Economist said in its Resources and Energy Quarterly report.

The impacts of declining gas production from the North West Shelf and Darwin projects are expected to be offset by a modest uptick in oil-linked contract prices between 2021 and 2023, and the ramp-up of the Pluto expansion in the final year of the outlook period.

Australia exported $51 billion of LNG in 2018–19 in real terms, up from $32 billion in 2017–18. Higher export earnings were driven by a recovery in oil prices relative to 2017–18, and growing export volumes, particularly from the Ichthys and Wheatstone (which began producing at full capacity in the second half of 2018) LNG projects.

The report notes that the country’s LNG capacity expansion is coming to an end. The wave of LNG investment in Australia saw over $200 billion invested in seven new LNG projects, which were commissioned between 2009 and 2012.

The ramp-up of these projects has seen Australia’s LNG export earnings reach $49 billion in 2019, and export volumes reach 77 million tonnes, making Australia the world’s largest LNG exporter in 2019.

Prelude and Ichthys are the last two remaining projects that are ramping up production following the wave of LNG investment. The Prelude project — which shipped its first LNG cargo in June 2019 — is expected to ramp up over the course of 2019-20.

Ichthys has ramped up faster than expected and is already producing at close to full capacity.

Australia’s LNG exports are expected to reach 81 million tonnes in 2020-21, before edging down towards 79 million tonnes by 2022–23.

Production at the Darwin LNG plant is expected to halt after 2021, as gas from the Bayu-Undan field is exhausted. The Darwin operation will require backfill from the Barossa project to continue production, although infill drilling at Bayu-Undan may extend its lifespan and narrow the time between its closure and the start-up of the Barossa backfill project.

An FID is expected for the Barossa project in the June quarter 2020, with first gas expected in 2023.

Production at the North West Shelf project is also likely to decline from around 2022 onwards. The development of Equus — which is on track for first gas by 2024 — is a potential source of gas for the North West Shelf project. However, due to timing issues, it is likely that there will be a fall in production for a period of time.

In the longer term, backfill resources for the North West Shelf project will likely come from the Browse Basin project fields of Calliance, Torosa and Brecknock. The FID for the Browse Basin project has been delayed from late 2020 to late 2021, with first production targeted for 2026.

There are a number of projects in the pipeline that could see Australia’s LNG export capacity rise towards the end of the outlook period and beyond (Table 7.2).

An FID is expected in 2020 for the Pluto LNG expansion project, with first production targeted for 2024. Building an additional train at the Pluto LNG plant forms part of Woodside’s plans to develop the Scarborough gas field in the Carnavon Basin, connecting the offshore resource to the Pluto LNG plant via a 430-kilometer pipeline. The expansion of Pluto LNG is expected to offset the impacts of the halt in production at the North West Shelf operation and enable a rise in Australian LNG export volumes to 80 million tonnes in 2024–25.

The Beetaloo sub-basin, a substantial shale gas resource in the Northern Territory, represents a longer-term opportunity for Australia. However, given exploration is only just commencing, it remains uncertain what proportion of the resource will be technologically and economically viable to extract.

 

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Posted on March 23, 2020 with tags .

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