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Home LNG Contracts & Pricing

The case of the missing Gladstone LNG spot cargoes

Editor by Editor
5 months ago
min read3 min
LNG-spot
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We (EnergyQuest) have just released our July 2022 Australian LNG Monthly report. Some of the main points from the report are:

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Australian LNG exporters, who sent a record $70 billion worth of cargo overseas in the 2022 financial year, have been criticised for ignoring domestic gas supply constraints after demand for gas skyrocketed amid a number of coal-fired power stations being forced offline earlier this year.

As a result gas-use for power generation was up 37 per cent at 4.55 PJ, in July compared with a year earlier.

The resulting squeeze on gas has prompted the Commonwealth to consider triggering LNG export controls under a domestic gas market trigger.

This was fuelled by a scathing ACCC report that effectively accuses big gas producers of paying lip service to a “gentleman’s agreement” with the government to ensure sufficient domestic supply.

The ACCC warned against allowing exporters to sell all of their uncontracted gas overseas in 2023. It is predicting the East Coast gas market will suffer a shortfall of 56 petajoules, equivalent to about 10 per cent of next year’s forecasted demand of 571 PJ.

However, while we agree a gas shortfall of this amount is possible in 2023, we believe the amount of spot cargo available to divert to the East Coast is far less than the ACCC has calculated.

The ACCC claims that there were 22 LNG cargoes available from Gladstone between August 2021 and February 2022 that could have been diverted to the domestic market without affecting long-term LNG contracts.

However, comparing actual exports with the ACCC’s own estimates of gas under long-term contracts suggests the real number is probably only a quarter of that.

On page 32, Table 1.2, the report says gas supplied under LNG long-term contracts in 2021 was 1,328 PJ. Assuming 5.8% is used in processing LNG, 1,328 PJ would produce 22.6 million tonnes (Mt) of LNG. Actual Gladstone LNG shipments in 2021 were 23.4 Mt, according to the Gladstone Ports Corporation, implying spot sales of 0.8 Mt or 44.0 PJ.

Using the average 3.7 PJ/cargo used by the ACCC, that is 12 spot cargoes for all of 2021 or six cargoes in six months, just over a quarter of the six-month number quoted by the ACCC. There was no abnormal increase in Gladstone cargoes in January and February 2022.

Based on actual Gladstone exports together with the ACCC’s own estimates of gas under long-term contracts it appears to us that the number of producer spot cargoes shipped from Gladstone is quite modest, much lower than the total number of spot cargoes cited by the ACCC.

Most of the cargoes are under long-term contracts, particularly to China. In 2021-22 Gladstone supplied a staggering 20% of China’s LNG imports.

We believe that any shortfall would be easily resolvable without pulling the Australian Domestic Gas Security Mechanism (ADGSM) or re-negotiating the “heads of agreement” with big LNG producers to ensure sufficient gas is available to the domestic market before it goes offshore.

Other highlights of the report are:

Australian LNG exports reached a record $70 billion in the 2022 financial year, up by 130 per cent year-on-year, due to record export volumes, up by 5.1 per cent to 81.5 Mt from 77.6 Mt the previous year, and exceptionally strong prices.

EnergyQuest estimates that Australian LNG export revenue increased in July to a record $6.84 billion, up from $6.69 billion in June.

Australia supplied a record 73.8 mega tonnes (Mt) of LNG to North Asia –China, Japan, Korea and Taiwan – in the 12 months to June 30, up from the previous record of 72.4 Mt the previous financial year.

Japan has now re-established itself as Australia’s largest LNG customer, with trade to China dipping from a record 30.7Mt in 2021 to 26.8Mt.

There were also record Australian exports to Taiwan of 6.8 Mt up 24 per cent on the previous record of 5.5 Mt in FY 2021, and Korea of 11.0 Mt, up 39 per cent on FY 2021 and up 28% on the previous record of 8.6 Mt in FY 2020.

Source : EnergyQuest

Tags: Australian gasAustralian LNG exportsChinese LNG importsEnergyQuestGladstone LNGGorgon LNGLNG
Editor

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