Australian LNG exports to China surge despite tensions

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Australian LNG exports to China surged last month as bilateral trade in the raw material continues to ease tensions between the two countries that have damaged some other products.

Nine more LNG shipments were delivered to China in August compared to July, according to an analysis by consulting firm EnergyQuest, as total Australian exports reached 7.18 million tonnes, just short of a record.

The increase in shipments came as international gas prices “appear to be going crazy,” EnergyQuest said, noting higher prices not only for Asian spot LNG but for US benchmark Henry Hub and European futures prices on the European TTF hub in the Netherlands.

LNG spot prices are trading at nearly US $ 20 per million British thermal units during the generally mild shoulder season, up 10 times since mid-2020, while Henry Hub prices have topped $ 5 US / MMBTU – the first time to stay above this level on a sustained basis since March 2014.

EnergyQuest attributed the high prices to increased global demand after COVID-19 shutdowns last year, with China’s gas imports increasing 24% in the first half of 2021 compared to the same period in the year. last year, while consumption was up 13.5% in OECD Europe.

Chinese companies are the main buyers of LNG produced by Origin’s Australia Pacific LNG and Shell’s QCLNG company in Gladstone, Queensland, and also ship from Western Australia.

China’s gas demand has been boosted by a strong economic rebound from COVID-19, power shortages in an “extreme” summer climate, lower production from renewables, and strict limits on energy. use of coal, EnergyQuest said.

Gas-fired power generation in China jumped 14% in the first four months of the year compared to the same period in 2020, while hydropower generation in the southwest was curtailed by lower prices. rainfall and solar production was less than expected.

Coal supplies have also been constrained by local mine closures and the informal ban on imports from Australia.

Chinese LNG imports increased by 8.7 million tonnes in the first half of the year, including an increase of 1.5 million tonnes from Australia, while deliveries from the United States, Malaysia and Qatar also increased increase.

The increase in LNG trade between Australia and China comes as relations between the two countries face a new test following a new defense pact announced this week between Australia, the United States. United and the United Kingdom.

EnergyQuest CEO Graeme Bethune said Australian LNG exporters were relatively unaffected by the surge in prices, with most production plants already operating near full capacity and most sales falling under contracts linking prices to crude oil rather than spot rates.

He noted that while the surge in global prices has pushed “netback” prices for LNG – the equivalent price of Australian gas in the local market based on spot LNG rates in Asia – to double-digit levels per year. gigajoule, east coast spot prices fell sharply in August. .

EnergyQuest calculated that prices at the Queensland gas hub in Wallumbilla averaged $ 8.68 / GJ in August, up from $ 14.45 / GJ the previous month in a milder climate in all of the east coast capitals, lower demand for gas for power generation and the impact of blockages on industry demand.
Source: Australian Financial Review


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