Page 4 - GLNG Week 33 2022

GLNG COMMENTARY GLNG

Beach, BP finalise LNG

offtake agreement

COMMMENTARY BEACH Energy has finalised a sales and pur- agreed by the two parties support Beach’s expo-
chase agreement (SPA) to supply LNG to BP sure to the current commodity cycle prices and
from the Waitsia Stage 2 project, which it is do not restrict upside price participation. The
developing jointly with Mitsui & Co. Under the SPA also includes a downside price protection
agreement, all 3.75mn tonnes per year (tpy) of mechanism, it said.
Beach’s anticipated LNG volumes from Waitsia Beach and BP’s SPA comes at a time of inten-
Stage 2 will be sold to BP. sifying pressure on Australia’s LNG exporters to
The move represents a push by Beach to prioritise the domestic market amid a gas short-
diversify its commodity pricing exposure while age in the country predicted for 2023 and 2024.
capitalising on high natural gas prices. Earlier this month it was reported that the
“Signing of the LNG SPA with BP is a signifi- Australian government was considering curb-
cant milestone in our delivery of material growth ing exports of LNG following a recommendation
and another step closer to Beach becoming a from the Australian Competition and Consumer
supplier of LNG to the global market,” stated Commission (ACCC). The plan is being consid-
Beach’s CEO, Morné Engelbrecht. “Once LNG ered in order to divert supplies to the domestic
sales commence, Beach will have further diversi- market. It has gained traction among various
fied its commodity pricing exposure. Beach’s oil stakeholders, with state energy ministers from
and gas portfolio will provide exposure to Brent New South Wales and Victoria calling on pro-
oil prices, spot LNG prices, East Coast, West ducers to prioritise the domestic market this
Coast and New Zealand domestic gas prices, week.
and oil-linked gas prices. This places Beach in an Australian Minister for Resources Madeleine
enviable position within the Australian energy King is now consulting with the country’s LNG
sector,” he added. exporters, as well as overseas trading partners,
Waitsia is one of the largest onshore natural before making a decision on the matter in Octo-
gas fields ever discovered in Australia, according ber. She has already extended the Australian
to Mitsui. The company has described Stage 1 of Domestic Gas Security Mechanism (ADGSM)
the project as essentially an extended production until 2030 and said she was also looking into
test, with two wells connected to the refurbished strengthening the mechanism, potentially
Xyris production facility. including a price trigger. However, she said there
Stage 1 supplied around 10 terajoules was no point in seeking to break Australian LNG
(268,421 cubic metres) per day from August exporters’ long-term contracts, and that she
2016 until December 2019. An expansion of wanted the country to continue to be known as
Stage 1 saw a third well brought online, as well a reliable trading partner. Thus volumes that are
as a pipeline constructed from Xyris to connect sold on the spot market are expected to be the
to the nearby Dambier-to-Bunbury gas pipe- most exposed to any curbs that may be brought
line. This raised Stage 1’s production to 20-30 in.
TJ (536,843-805,265 cubic metres) per day as of Some Australian LNG players are hoping to
August 2020. avoid export curbs by stepping up investments
Under the Stage 2 project, Mitsui and Beach in gas production for the domestic market.
are aiming to fully maximise the Waitsia field’s Among these is Senex Energy, which announced
potential, and are building a 250 TJ (6.7mn cubic an expansion of its Surat Basin operations this
metre) per day processing plant that will be fed week. Senex supplies gas to the Gladstone LNG
by up to eight production wells phased in over (GLNG) terminal in Queensland. Another sup-
a 15-year lifecycle. Gas will then be sent to the plier to the facility, Santos, which also operates
North West Shelf LNG project via the Dambi- GLNG with a 30% stake, is pushing to connect
er-to-Bunbury pipeline, as well as being supplied its newly acquired Hunter gas pipeline to its Nar-
to the domestic market. rabri gas project, which would link that project
Beach anticipates that it will begin supplying to the domestic market.
BP with LNG from Stage 2 in the second half GLNG is considered to be one of the projects
of 2023, with the SPA having a duration of five most likely to be affected if export curbs are
years. The company noted that BP is a partner brought in.
in the North West Shelf project and has a “long If Canberra decides to proceed with export
history” of lifting LNG from the facility. curbs, this could affect gas supplies and prices
The LNG that BP will receive is priced using a in 2023, after markets have already experienced
hybrid pricing structure linked to both Brent and unprecedented volatility in 2022 owing to Rus-
Japan Korea Marker (JKM) indices, Beach said. sia’s war in Ukraine.™
The company added that the pricing parameters

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