EnergyQuarterly September 2020

The September 2020 EnergyQuarterly report has just been released, with comprehensive Australian energy data for the June Quarter plus analysis of the latest developments. 

In the Observations Section we have  a number of articles commenting on topical issues:  

  • Creating barriers to an efficient gas market
  • Is cheaper east coast gas possible?
  • WA goes for gas
  • Australia a significant force in world energy
  • Impacts of COVID-19

As usual we also dive into the east coast gas market in detail, particularly the latest ACCC report, and pull together all available information on international and domestic energy prices. For anyone hoping for a gas-led recovery, industry spending is way down reflecting the fall in energy prices but also political constraints. However there is a lot happening on hydrogen. Our list of Australian projects nearly spills on to two pages. We’ve also taken time to bust a conspiracy theory about Australia-Timor-Leste relations.

Some of the statistical highlights are:· 

  • Notwithstanding COVID-19, Australian domestic gas consumption grew on both the east and west coasts in Q2, in contrast to the experience across most of the developed world.
  • Total domestic gas consumption on the east coast was 7.7 PJ higher qoq in Q2.
  • East coast gas supply (production plus NT imports) increased by 4.2 PJ qoq from 482.9 PJ to 487.1 PJ. LNG exports decreased by 4.4 PJ qoq to 301.2 PJ, leading to an improvement of 12.6 PJ qoq in the gas demand and supply balance.
  • Australian LNG projects exported a record 79.1 Mt in the 12 months to June 2020, up 5.9% from 74.7 Mt a year earlier. Towards the end of the year the industry began to buckle under the weight of a global glut of LNG. Production in Q2 2020 fell to 19.1 Mt, the lowest since Q3 2018. 
  • The immediate impact of lower energy prices on LNG price realisations was mixed. Producers such as Woodside, with a relatively high proportion of spot cargo sales, felt the biggest price impact, while APLNG and GLNG saw out FY 2020 with only little deterioration in realized prices. Total export revenue for FY 2020 was $47.8 billion, down only 3.8% from a year earlier. However, the negative impact on prices and revenues is accelerating. Export revenue in Q2 of $10.5 billion was down 16.1% from $12.6 billion in Q1.
  • Queensland’s LNG projects finished the financial year strongly. All three projects shipped record tonnages in FY 2020. Queensland LNG export revenues were steady at $4.16 billion between Q2 2019 and Q2 2020 and up slightly from Q1. However, revenues are likely to have turned down from July. 
  • In FY 2020 WA domestic gas production reached a record 424.5 PJ, well ahead of record demand of 397.4 PJ. In Q2 production increased by 4.6 PJ (4.4% qoq) to a record 110.8 PJ. Demand increased faster, by 6.4 PJ (6.2% qoq) to a record 103.4 PJ but below production.
  • The traditional Western Australian approach to gas policy is now coming under strain, with additional domestic gas from LNG projects leading to a glut of domestic gas. WA’s LNG projects supplied only 9.6% of their LNG as domestic gas in Q2, well below the 15% mandated in the domestic gas reservation policy. Altogether there is another 345 TJ/d of onshore gas looking to be developed, far more than the domestic market can absorb in the short-term. However, the market is likely to tighten in the medium-term.
  • As one of the world’s major LNG producers Australia is to some extent becoming a price-maker in relation to spot prices. The Platts JKM has increased from US$2.15/MMBtu at the start of July to US$4.66/MMBtu on 4 September. This coincides with unexpected outages at the WA Gorgon LNG project due to the shut-downs for repairs. The ACCC’s east coast netback gas price estimates are based on the Platts JKM so unexpected developments in WA that affect spot prices will directly feed in to east coast netback estimates and possibly east coast prices. 

Further infomation, including the brochure with full table of contents, can be obtained by clicking here.