A bit more positive news
Source AFR
Gloomy predictions 12 months ago of a slump in global LNG prices that could last until 2025 have turned out to be wildly – and for some painfully – off the mark, and Australia’s two biggest producers are positioning themselves to benefit.
Importers in Japan and South Korea, hit by freezing winter temperatures, have had to
pay through the nose for imported gas this month, as a perfect storm of increased demand, plant outages and shipping congestion combined to send LNG prices into the stratosphere.
The historic surge in Asian benchmark prices from record lows below $US2 per million British thermal units last June to almost $US35 last week has earned LNG the moniker of the “bitcoin of energy”. Indeed, the incredible rally means “bitgas” has left Bitcoin in the dust, says Credit Suisse analyst Saul Kavonic.
To be sure, this month’s “super-spike” in spot LNG is just that – a spike that has already faded and which only affects a handful of cargoes worldwide.
The bulk of LNG sold from Australia is indexed to oil, where prices have more than doubled since 2020′s trough but remain vulnerable to geopolitical factors. Moreover, both Woodside Petroleum and Santos this week fell short of market expectations for prices realised in oil and LNG in their December quarter reports.
But Woodside chief executive Peter Coleman points to fundamental reasons that back a more positive outlook for LNG this year, while the squeeze in supplies that caught out some "complacent" buyers this Northern winter will likely act as a broader "reality check" throughout the market.
Mr Coleman notes that even through the pandemic last year, demand for LNG remained robust, with global consumption rising about 2 per cent, while growth in Asia, the biggest regional consumer, was double that. Indeed in China, imports look to have grown almost 10 per cent.
On the supply side, some newer projects have suffered reliability hiccups while this winter showed that the flexibility many believed had emerged to switch cargoes between the Atlantic and Pacific markets only comes at a price – more shipping miles, longer transport times and higher charges.
“It’s not as easy as flicking a switch: it is switchable between the markets but it comes at a cost and this year we saw truly what that cost can be,” Mr Coleman,
who is due to retire as CEO in the December half, told
AFR Weekend.
That means that while the LNG market is still broadly seen as over-supplied, prospects in Asia have firmed.
