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Yet more Australian LNG

While there's no end in sight for the global gas glut, higher crude prices will help exporters

Australia's liquefied natural gas (LNG) exports will rapidly increase this year as output ramps up at existing projects and new facilities come online.

EnergyQuest, a consultancy, estimates that the country's LNG exports will surge by 62% in 2017, reaching 60m tonnes.

Output ramp-ups at the Australia Pacific LNG facility in Queensland and Chevron's Gorgon project, in Western Australia, coupled with new projects coming online will help to push the country's exports 23m tonnes higher than in 2016. It will worsen the global gas glut.

This year's surge will come after a 38% increase in 2016, which brought 36.8m tonnes of Australian LNG to markets. In 2015, Australia exported 26.7m tonnes.

The consultancy predicts that if international oil prices remain at levels seen at the end of January - around $55 per barrel - the value of Australian LNG exports will double to around A$36bn ($27.2bn) in 2017, compared with A$17.9bn in 2016.

Three new LNG plants around Gladstone helped the state of Queensland to almost triple its LNG exports last year, reaching 17.5m tonnes, EnergyQuest says. Exports from Australia's west coast fell slightly in 2016, down to 19.3m tonnes.

Total global LNG exports are expected to rise by 34.9m tonnes this year, reaching 296.6m tonnes, according to Energy Aspects, a consultancy. That's a rise of around 12% from 2016.

Japan buys almost half of Australia's exported LNG. China was Australia's second largest buyer last year, taking around 30% of the total, but 60% of cargoes from Queensland.

While colder winter weather in Asia has provided a temporary boost to spot prices in the region, this isn't expected to last throughout the year. Spot LNG prices in Asia surged to $9 per million British thermal units at the end of 2016, up from just $4/mBtu in April.

In Q1 2017, Energy Aspects expects spot prices in Japan to average around $8/mBtu, up from around $5/mBtu at the same time last year. In Q2 they are expected to average around $5/mBtu before falling back to around $4.50/mBtu in the second half of the year.

Spot prices in other regions will experience similar trends. Average Q1 LNG prices in Spain will be $6.60/mBtu, Energy Aspects says, before falling to around $4.40/mBtu in Q3. Henry Hub prices are also expected to reach a 2017 peak of $3.50/mBtu in Q1, before falling to $3/mBtu in Q3.

Yet more gas: Australian LNG exports in 2017 (m t/y). Source: Energy Aspects
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