Page 5 - GLNG Week 30 2021

GLNG COMMENTARY GLNG

The state government
has suggested that
downward pressure on
pricing will come from
the Narrabri project
along with proposed
LNG import terminals
at Port Kembla and
Newcastle.

reduce local gas prices, then limiting domestic Australian gas users catch a cold.”
development and leaning on gas imports seems While higher than usual East Coast whole-
somewhat counterintuitive. sale and spot gas prices have made headlines
The Australian Petroleum Production and in recent weeks, robust LNG prices have rattled
Exploration Association (APPEA) highlighted the country’s biggest gas buyers. Large-scale
this on July 21, when it noted that local buy- gas consumers tend to sign long-term supply
ers would have to pay well in excess of AUD20 agreements, with smaller outfits leaning on the
($14.74) per GJ for imported gas based on cur- wholesale and spot markets.
rent international prices. Asian demand for LNG cargoes has driven
APPEA NSW director Ashley Wells argued benchmarks to multi-year highs in recent
that the decision to limit future gas development weeks, with traders telling Reuters last week
to the Narrabri project would lock NSW cus- that spot prices for September delivery car-
tomers in higher gas prices over the long term. goes into Northeast Asia were around $13.30
“It is pretty simple, the cheapest gas is the gas per mmBtu.
closest to market. This shortsighted decision “[Local buyers] won’t be hit immediately by
will mean higher gas prices in NSW are the spot fluctuations, but these acute surges and the
norm, not the exception,” Wells said. “For the chronic rise in gas prices are clearly going to hit
NSW government to effectively ban a proven, new contracts,” Willox said.
safe and highly regulated industry doesn’t make Australian Competition and Consumer
sense.” Commission (ACCC) chairman Rod Sims,
He warned that both increasing gas demand meanwhile, said the LNG netback price had Asian demand
and limited upstream development options risen from AUD9.30 ($6.85) per GJ in May to
would see manufacturing jobs either shift to more than AUD11 ($8.12) in June. for LNG cargoes
other states or overseas. “We’ll be watching very closely to see that has driven
East Coast manufacturers are already com- prices are still guided by the international price,
plaining over high gas prices, noting that the and we’ll be hoping the price heads back down,” benchmarks to
federal government’s gas-fired recovery was at he told the SMH.
risk of failing. The NSW state government seems content multi-year highs
with relying more heavily on other states as
What next? well as the international market to meet local in recent weeks.
Sydney and Adelaide’s wholesale markets saw demand. Either way carries its own cost.
gas trades of AUD20 per GJ last week, which the Wells argued that transporting gas from
Sydney Morning Herald (SMH) noted was three Queensland to southern customers already
times higher than pre-pandemic levels. Spot gas added AUD2-4 ($1.47-2.94) in costs. A greater
prices in Victoria, meanwhile, were around reliance on imports will require greater invest-
AUD13 ($9.58) per GJ. ment in import infrastructure, with supply
“Gas users are intensely worried by the price pricing directly trending to the international
surge,” the CEO of Australian Industry, Innes markets.
Willox, told the local daily on July 15. Asian gas demand is only set to grow in
He added: “None of the gas-fired recov- the coming decades, as various governments
ery policies look capable of changing the fact across the region strive to deliver upon recently
that when export gas markets sneeze, eastern pledged net carbon neutrality targets.™

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