Australia ups 2016-17 LNG export forecast to 52.4 million mt

The Australian government has raised its forecast for LNG exports for fiscal 2016-2017 to 52.4 million mt, according to the latest quarterly report by the Department of Industry, Innovation and Science.

In its previous report named Resources and Energy Quarterly, the department said that Australia’s LNG export volumes are expected to increase to 51 million mt in the fiscal year spanning from July to June.

Australia’s LNG export volumes are forecast to grow further in 2017–18 to 67.3 million mt.

The four LNG projects currently under construction, including Chevron’s Wheatstone and the Inpex-operated Icthys project, are expected to commence production by mid-2018, bringing Australia’s LNG export capacity to around 87 million tonnes, the department said.

“However, some uncertainty surrounds the timing of Shell’s Prelude project in the Browse Basin, where start up could be complicated by the cyclone season — which runs from November to April,” it added.

Increased LNG exports to Japan, South Korea and China are expected to drive the rise in Australia’s export volumes.

“Australian producers are expected to capture an increasing share of these countries’ imports with the commencement of a number of long-term contracts over the outlook period.”

LNG prices continue to rise

The price of Australian LNG delivered to major markets in North East Asia increased between July and October of 2016.

The price of LNG into Japan, Australia’s largest market and the world’s largest importer, averaged $7.05 a gigajoule October, up from $6.13 in July, the department said.

“The uptick in prices reflects the effect of the oil price rally during the first half of 2016. Most Australian LNG delivered into Asia is sold under contracts linked to the Japanese Customs-cleared Crude (JCC) oil price by a time lag of three to four months.”

The average price for Australian LNG delivered to North East Asia is expected to have remained largely unchanged over the last few months of 2016, the department noted in the report.

“The JCC oil price remained broadly stable in August and September at around $45 a barrel, and its lagged effect on LNG contract prices is expected to be seen in the coming months,” it said.

LNG contract prices are then expected to rise over 2017 and 2018, in line with the forecast for a recovery in oil prices to over US$60 a barrel.

While the increase in the average price of Australian LNG has primarily been driven by contract prices, spot prices have also increased over the past few months, the government report said.

“The North East Asian spot price climbed from lows of $4.16 a gigajoule in April to average $6.91 a gigajoule in November — its highest level in a year.”

According to report, cold weather prompted strong spot market buying from North East Asian economies, while the suspension of operations at nuclear plants in South Korea — following an earthquake — also contributed to increased demand for LNG.

“The recent rally in spot prices is expected to be temporary, with the entry of new capacity in the US and Australia ensuring that the market remains well supplied,” the report said.

LNG World News Staff