Australian gas exports continue to rise

PERTH (miningweekly.com) – Australia’s natural gas output reached a record 3 770 PJ in 2017, up 27% on the 2016 financial year, energy market analyst EnergyQuest reported on Wednesday.

EnergyQuest CEO Dr Graeme Bethune noted that gas production from the east coast was catching up with demand, with liquefied natural gas (LNG) production and domestic gas production in the region both increasing during the second quarter.

LNG exports for the period were up by 19.4%, to five-million tonnes, while domestic gas production was up 11.9% to 193.2 PJ in the fourth quarter of the 2017 financial year.

Queensland coal seam gas (CSG) production rose by 20% to 333 PJ while offshore Victorian production grew by 13% to 110 PJ in the same period.

“Queensland is importing less gas to the point where it is increasingly self-sufficient. Even with its LNG plants, the state is importing only about 2 PJ per month, or 1.4% of the east coast supply,” Bethune said on Wednesday.

“There has also been a net flow of gas south from Queensland since the first week of June, for the first time since November 2015. However, New South Wales, South Australia and Tasmania are increasingly reliant on gas imports from Queensland and offshore Victoria. New South Wales imports around 10 PJ per month and even South Australia nearly 4 PJ,” Bethune said.

“Although there has been an increase in domestic gas supplies, east coast prices remain globally uncompetitive. While on a comparable basis, short-term east coast gas prices were A$0.26 to A$1.77 per gigajoule below Japanese import prices, Japanese prices are among the highest in the world, as are east coast short-term prices and prices for new gas contracts.”

National petroleum production was a record 767-million barrels of oil equivalent in the 2017 financial year, up 19.5% from 2016, driven by surging LNG production, which climbed to 51.5-million tonnes in 2017, up by 38.7%. LNG exports were almost 2.5 times the volume of national domestic gas production, which was steady at 1 119 PJ.

Bethune said 2017 marked a major shift in the petroleum industry as the LNG investment boom moved deeper into its production phase.

“The start-up of the Gorgon LNG project has also shaken up the order of Australia’s petroleum heavyweights,” he added.

“With production of 111-million barrels of oil equivalent, Shell overtook Woodside, BHP and Chevron to become Australia’s largest petroleum producer in 2017. The rankings will change again this year, with Chevron already up in second place on a quarterly basis.”

Bethune said plummeting national oil production was in sharp contrast to the rest of the petroleum industry. Oil production fell to 54.4-million barrels, down 24.7% compared to the previous year. On current trends, oil will soon be eclipsed by condensate produced as a by-product of gas and LNG projects, Bethine said.

“National oil output has fallen to the lowest level in more than 40 years at just 140 000 bbl/d in 2017, compared to consumption of more than 1-million bbl/d. This decline and the well-documented shortfall in our oil security arrangements makes Australia particularly vulnerable to disruptions to shipping routes from refineries in Singapore, Korea and Japan.”

The Australian Burea of Statistics (ABS) on Wednesday reported that the LNG export industry has contributed to a 0.8% growth in Australia’s economy during the June quarter of 2017.

Oil and gas extraction rose by 8.2% over the June quarter, following a record A$23-billion in LNG exports in 2016/17.

The Australian Petroleum Production and Exploration Association (Appea) said on Wednesday that the ABS data confirmed how significant LNG exports were to sustaining Australia’s economic growth.

“Australia’s LNG projects will deliver decades of economic growth, jobs and exports with the value of our exports expected to increase by around A$7-billion to A$39-billion next year,” Appea CEO Dr Malcolm Roberts said.

“The political argument taking place at the moment is even more detached from reality when we have policy proposals that would effectively discourage investment in new gas supply just when Australia needs to attract up to A$50-billion to maintain supply to 2030.

“For LNG to continue to be a pillar of the nation’s economy amid challenging market conditions, exploration and development must be fostered, not restricted.

“The industry urges a pause in the flurry of industry bashing and a sober focus on cooperative action to reduce the cost and risks of producing gas for the domestic market,” Roberts said.

Meanwhile, ABS chief economist Bruce Hockman noted that recent swings in coal and iron-ore prices have had significant effects on the Australian economy in terms of export revenues and real incomes, adding however, that export volumes for these commodities continued to grow in the June quarter.