Woodside set toshine as spot LNG prices soar

Woodside Petroleum stands to cash in from an expected doubling of spot LNG prices in 2021. Picture: Che Chorley

· PERRY WILLIAMS

· 9:07PMJANUARY 11, 2021

· 5 COMMENTS

WoodsidePetroleum stands to cash in from an expected doubling of spot LNG prices in2021, Bernstein analysts say, after the fossil fuel soared to an all-timerecord.

TheWest Australian producer has among the highest exposure to spot LNG and willbenefit in the short term, with spot LNG forecast to trade at $US8 ($10.40) permillion British thermal units in 2021 and $US9.50/mmbtu in 2022, more thandouble 2020 prices of $US4.20/mmbtu.

“IsLNG the bitcoin of energy? LNG prices have increased from $US2 to over$US20/mmbtu on a cold winter with temperatures in Beijing dropping to a 50-yearlow,” Bernstein analyst Neil Beveridge said.

“Butthe seasonal trade could give way to a more structural trade, given the lack ofnew supply which will reach the market. Companies exposed to spot LNG andinternational gas prices will benefit.”

LNGprices in Asia have soared to an all-time record above $US20/mmbtu with a coldsnap sparking a battle among the world’s biggest gas buyers to secure supplies,potentially delivering a windfall for Australian gas producers.

Thebull run will subside but companies including Woodside, Oil Search and Santosare well placed to cash in.

“Thetightening of LNG markets has been simply breathtaking and a sharp reminder forany commodity investors of how quickly things can change,” Mr Beveridge said.

“Inour view this is clearly seasonal, but there are also some structural elementsto it which cause us to believe that LNG prices could be much firmer in thenext few years.”

Limitednew supply coming on in the next few years will support LNG prices over themedium term, according to Bernstein. “After 30 million tonnes a year of new LNGsupply additions over the past four years, we expect only 10-15 million tonnesa year of new supply coming on to the market over the next four years (which is3-5 per cent of annual demand).

“Inaddition, disruption to Gorgon, Prelude and other LNG supply projects hasresulted in a shortfall of physical LNG supply to the market,” Mr Beveridgesaid.

Therising LNG price is a sharp turnaround in fortune for Woodside, which inOctober last year cut 300 jobs, or 8 per cent of its workforce, after an oilprice rout forced it to delay projects and trim spending.

Thehigher prices also come as Woodside searches for a new chief executive after thesurprise exit of Peter Coleman, announced late last year.

Santosboss Kevin Gallagher has been named an early favourite to replace Mr Coleman,with other names including Shell’s Zoe Yujnovich, BHP’s Geraldine Slattery,BP’s William Lin and ExxonMobil’s Andrew Barry.

Woodside’sVP development and marketing Meg O‘Neill is seen as the leading internalcandidate alongside chief financial officer Sherry Duhe and chief technologyofficer Shaun Gregory.

Thegroup’s shares closed up 2.6 per cent on Monday at $25.46.