Australian LNG Exports to Hit 74mn mt in 2018-19; Prelude Slips
Australia is all set to challenge Qatar in the global market as its LNG exports are expected to rise to 74mn metric tons/yr by June 2019 compared with almost 64mn mt in 2017-18 and 52mn mt in 2016-17. The increase is driven by higher production at Gorgon, as well as the completion of the three remaining LNG projects under construction: Wheatstone, Ichthys and Prelude.
However, with its higher production costs and a weak market, Australian projects will be under-utilised, barring a steep rise in crude prices, according to a Department of Industry, Innovation and Science report October 6. As a result, although the three named projects will add around 21mn mt/yr to Australia’s LNG export capacity, bringing total nameplate capacity to around 88mn mt/yr, actual exports will be lower.
Woodside’s Wheatstone project is likely to be the first of the three projects completed, with train 2 due online between March and May 2018. First LNG at Inpex’s Ichthys project is expected in the March quarter 2018, while train 2 could start a few months later.
Delay for Prelude
The Prelude FLNG project is likely to be the last of Australia’s recent wave of seven LNG projects to be completed, with Shell indicating Prelude will be completed between May and August 2018, the report stated. Shell has not indicated to NGW that the project will be delayed by that much, although its original 2017 start date has been pushed back into 2018. The vessel arrived in Australian waters in late July.
Japan, South Korea and China will be the biggest drivers. The report states that while prospects for growth in the imports of Japan and South Korea are limited, Australian producers are expected to capture an increasing share of both country’s imports.
The value of exports in 2018-19 will rise to A$35bn ($27.3bn) as against A$22bn in 2016-17 underpinned by higher export volumes and, to a lesser extent, higher prices, the report said. Forecast export values have been revised down by around A$1.8bn in 2017-18 and A$3.3bn in 2018-19 from the June 2017 Resources and Energy Quarterly. The downward revisions reflect a more subdued outlook for oil prices, it said.
If the Japanese Crude Cocktail price forecast was reduced by $5/barrel, projected LNG export earnings would fall by A$2.7bn in 2018-19. Some uncertainty also surrounds the outlook for export volumes, the report said. Competition in global LNG markets is set to intensify over the next few years, and the average capacity utilisation of Australian LNG plants is expected to edge down.