Sydney Morning Herald: Tumbling Oil Prices Could Mean $30b hit for Australia's LNG Exports

The dive in global oil prices could wipe more than $30 billion from Australia's export bounty from liquefied natural gas in 2017-18, gouging a huge hole in revenue compared to the projections of just a year ago, according to Westpac economists.

New modelling by the bank on the hit to be taken on LNG revenue from the tumbling oil price has found that if oil prices follow the "forward curve", Australia's export earnings from LNG will total just $36 billion in 2017-18, rather than the $67 billion that could have been expected if prices had stayed at 2013-14 levels.

Commonly used in energy markets, the "forward curve" provides an estimate of future "spot" prices for energy sources such LNG or oil based on existing contracts for delivery of that energy in the future. LNG prices in Asia are tightly linked to crude oil prices via an indexing mechanism based on Japanese prices.

Concerns about pricing come at a crucial time for the local LNG sector, as gas delivered from huge investments in production in recent years begins to hit global markets. But analysts' consensus forecasts for Brent oil prices, which are more optimistic than the forward curve, suggest the impact on LNG export earnings might not be as great as the forward curve suggests, with 2017-18 revenue put at $51.6 billion. MORE