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Australia’s liquefied natural gas (LNG) exports will drop this year, continuing a trend from last year after reaching a record high in 2022.
That’s the projection of analysts at BMI, a Fitch Solutions company, in a report sent to Rigzone recently. The country’s LNG exports are estimated to fall to 3.425 trillion cubic feet (97 billion cubic meters) in 2024 after reaching a record high of 3.567 trillion cubic feet (101 billion cubic meters) in 2022, the analysts stated.
The analysts said in the report that the expected decline in 2024 is due to anticipated delays in the feed gas supply for the Darwin LNG project and the shutdown of LNG production trains at the Northwest Shelf (NWS) LNG.
Australia’s total LNG exports slightly decreased to 3.531 trillion cubic feet (100 billion cubic meters) in 2023, primarily because of lower production from the NWS LNG project, the suspension of Darwin LNG production following the loss of feed gas supply from the Bayu-Undan field, and the maintenance shutdown of Shell’s Prelude LNG project in the third quarter of 2023, the analysts said.
“Although Prelude LNG has completed maintenance, we foresee potential downside risks to LNG production and exports, which could stem from substantial production declines at the NWS and Darwin LNG projects,” they remarked.
The analysts noted that Woodside Energy is expected to take one 2.5 million metric tons per annum (mtpa) train of its 16.9 mtpa NWS LNG offline in 2024, while fellow operator Santos’ 3.7 mtpa Darwin LNG will remain idle as it prepares for backfill from the Barossa field, scheduled for first gas in 2025.
“Our bearish near-term outlook for Australian gas production and LNG exports is also supported by Santos’ weak production guidance for 2024. The company has stated that it expects its total hydrocarbon production to decline from an estimated 89-93 million barrels of oil equivalent (boe) in 2023 to 84-90 million boe in 2024,” they continued.
The analysts highlighted that legal risks to new gas projects could delay natural gas production and transportation intended for LNG production.
They cited an example in early November 2023, when Australia’s Federal Court halted the construction of subsea pipelines for Santos’ Barossa gas project due to environmental concerns and the cultural impact of the pipelines on local communities. In January, the Federal Court ruled in favor of Santos, allowing it to continue the construction of the Barossa gas pipeline project, which had been legally challenged by the Tiwi Islanders on environmental grounds.
“This ruling is a positive outcome for Santos, as it may proceed with the construction of the pipeline. However, it remains unclear whether the Tiwi Islanders will appeal the court’s decision. Santos is still attempting to develop environmental management plans to allay the concerns among the Tiwi Islands community stemming from the Darwin pipeline and Barossa gas production operations. If Santos resumes pipeline construction, we can expect Australia’s natural gas output to return to growth from 2025,” the analysts remarked.
The analysts also emphasized that the government’s intervention in the domestic gas market and LNG exports remains a high regulatory risk. They noted that the government has exclusive authority to determine whether there are shortages of natural gas for domestic consumption and may decide to limit LNG exports accordingly.
“In the near term, we believe the impact of such potential controls on Australia’s LNG exports will be limited. However, anticipated increases in natural gas supply shortages in the eastern and southern states, where gas production is falling, could prompt the government to divert more gas to the domestic market, undermining LNG exports,” they said.
“We expect a rebound in natural gas consumption supported by an anticipated increase in supplies for the domestic market,” the analysts conclude in the report.
Australia’s natural gas consumption fell by 6.6 percent year-on-year, the analysts said, citing Joint Organizations Data Initiative (JODI) data. While natural gas consumption has remained subdued, due primarily to lower gas-fired electricity generation and a decrease in demand from alumina refining activity, the analysts foresaw a rebound in natural gas consumption “since the Australian Competition and Consumer Commission (ACCC) capped natural gas prices at $11.37 per million British thermal units (mmbtu) and banned the supply of gas above this reasonable price”.
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