Australia: LNG Export Blooms with Volume and Price Edging Up

According to a report from Department of Industry, Innovation and Science, Australia’s LNG export value is estimated to jump from A$23 billion in 2016-2017 to A$39 billion in 2022-2023. Rising export values will be driven by higher export volumes (especially over the short term) and, to a lesser extent, higher prices.

Australia’s LNG export volumes are forecast to reach 79 million tons in 2022-23, up from 52 million tons in 2016-17. Higher export volumes will be driven by the completion of the three remaining LNG projects under construction, Chevron’s Wheatstone, the Inpex-led Ichthys and Shell’s Prelude FLNG. The completion of these three projects will bring the combined nameplate capacity of Australia’s LNG projects to 88 Mtpa.

Chevron’s Wheatstone project is likely to be the first of the three projects completed. Train 1 at Wheatstone has already begun production while train 2 is due to come online in the June quarter 2018. Shell has indicated that the Prelude floating LNG project will be completed between May and August 2018. First gas production at Inpex’s two train Ichthys project is expected to start in April or May 2018.

Prices of the Australian LNG volumes delivered on a free on board (FOB) basis are projected to edge up from A$8.30 a gigajoule in 2016-2017 to average A$9.3 per gigajoule in 2022-2023. Higher export prices will be driven by rising oil-linked contract prices. Most Australian LNG is sold into Asia on contracts linked to the price of Japanese Customs-cleared Crude (JCC) oil by a time lag of around three months. However, low LNG spot prices will play some role in constraining the average export price realized over the next few years, as Australian exporters increase their share of sales at spot prices.