Rising Oz LNG Export Prices to Lift Domestic Gas Costs: NAB

Australian LNG export prices are expected to rise throughout the remainder of the year and put upward pressure on gas prices on the country’s east coast, the National Australia Bank (NAB) said July 5.

“With many Australian gas export contracts tied to the price of oil, the recent surge in oil prices points to higher export prices,” NAB said in its Minerals and Energy Outlook.

“Our Australian gas export price indicator hit double figures in Q1 to reach A$10.08/GJ [$7.47/GJ] and we now see the indicator exceeding A$12/GJ by Q4 2018,” it added.

The higher export prices will in turn put upward pressure on the eastern Australia domestic gas prices, NAB said, adding that the export controls the Commonwealth Government imposed in the middle of last year led to some downward price pressure by reducing domestic spot premiums over export, but that it is difficult to see domestic prices remaining below export parity – after accounting for transport and liquefaction costs.

“The era of $2-4/GJ gas in eastern Australia is well and truly over. Many domestic gas purchasers will be lucky to secure gas under $10/GJ in the medium term,” it said.

NAB forecasts the Australian LNG export prices to marginally ease back from A$12.6/GJ in the December quarter to A$11.4/GJ a year later.