The Victorian spot gas price hit $20 per gigajoule (GJ) on Tuesday afternoon, the highest price since 27 June 2016, five years ago. Other east coast prices were also high, $18.20/GJ at the Wallumbilla hub, $15.44/GJ in Sydney, $14.79/GJ in Adelaide and $14.39/GJ in Brisbane.
Factors driving the surge in prices include strong winter gas demand, an outage at Longford and a spike in international gas prices, driven by hot weather and re-stocking of storage.
Victorian gas demand peaks in winter. Melbourne’s maximum temperature is forecast to be only 13 degrees on Wednesday and total Victorian gas demand is currently over 1,000 TJ/d. However the state’s largest gas plant, the ExxonMobil, Esso-operated Longford plant, has had one processing train out of action since 28 June. In an emailed statement, Esso said:
“Esso Longford’s Gas Plant 3 (GP3) experienced an unplanned maintenance event on 28 June 2021. Our team is working to safely resolve this short-term issue as soon as possible and resume full gas production. We anticipate that this will slightly reduce our daily supply into the east coast market. We are working closely with AEMO and our customers to minimise any potential disruptions to their operations as a result of this.”
According to the Gas Bulletin Board Longford produced 981 TJ on 27 June but this dropped by over 100 TJ on 28 June to 877 TJ. Short-term plant capacity is now listed as being 860 TJ/d. This is 10% below production immediately before the outage and 22% below nameplate capacity .
Another likely factor influencing east coast gas prices is high international gas prices. Asian spot LNG prices are at an eight-year seasonal high. The Platts JKM Asian LNG spot price was US$14.31/MMBtu (A$18.00/GJ) on 5 July. After a colder than usual winter, LNG buyers are re-building stocks ahead of next winter while hot summer weather is now driving demand for power generation for air conditioning. US gas prices are at 30-month highs and UK gas prices are the highest since 2008. There is no sign of higher Gladstone shipments in response to higher international prices. LNG exports from Gladstone in June were down slightly on May with 27 cargoes and in the first week of July Gladstone has only shipped four cargoes. However high international prices are likely to be influencing east coast spot prices.
Overall east coast domestic gas is suffering a double-whammy of a plant outage and surging international prices in the middle of the peak southern winter demand season.
We will be looking at all these developments more closely in our June Australian LNG Monthly report, to be released next week.