Analysis: Strikes knock another leg out from under Australia’s LNG throne

KYUDEN Holdings

15/09/2023 05:04

(Updates to add link to related timeline)
    By Emily Chow and Yuka Obayashi
       SINGAPORE/TOKYO, Sept 15 (Reuters) - Long before labour
unrest at liquefied natural gas (LNG) plants threatened to
disrupt supplies, Australia was on track to lose its crown as
the world's top exporter due to green government policies,
measures to protect domestic energy needs and expansion plans
from Qatar and the United States. 
    Workers at two LNG platforms owned by Chevron  CVX.N , and
that account for over 5% of global supply, plan to escalate the
rolling strikes they began last week after failing to resolve
disputes over pay and conditions.
    While the industrial action has rattled European gas
markets, buyers of the Australian super chilled fuel say they're
more worried about a series of measures introduced by the
government to meet domestic energy needs, manage soaring gas
prices and reduce emissions.
    "There is a concern that the willingness to invest in
Australia and confidence in the country may decline," said a
spokesperson for Japan's Kyushu Electric Power  9508.T , which
has long-term contracts with Chevron's strike-hit Wheatstone
plant and Woodside Energy Group's  WDS.AX  North West Shelf
facility off the coast of Western Australia.
    Australia was the world's top LNG exporter last year,
sending out 80.48 million metric tons according to Kpler data,
but export volumes have fallen behind the United States and
Qatar for the first eight months of 2023.
    China and Japan are Australia's main buyers, followed by
South Korea and Taiwan.
    Japan's top energy producer Inpex  1605.T , which is
considering expanding its Ichthys LNG project in Australia, said
the government measures "could reduce investment in Australian
LNG projects, which may have a significant impact on the
development and growth" of the industry.
    "We will continue to call on the Australian government to
maintain and improve an appropriate investment environment," a
spokesperson said.
    Asked about these concerns, a spokesperson for federal
Minister for Resources Madeleine King said Australia was
committed to remaining a long-term, reliable supplier of
resources and energy to its trading partners, and was committed
to being a stable and secure destination for investment.
    
    CONSIDERABLE COMPETITION
    LNG buyers are particularly sensitive to anything that
affects the security of their supplies, especially after
Russia's invasion of Ukraine sent European buyers scrambling for
alternatives to Russian piped gas, triggering a surge in prices.
    For Australia, the supply concerns coincide with plans by
the United States, which has the world's largest liquefaction
capacity, and state-owned QatarEnergy to ramp up production.
    "We've certainly seen Australia's reputation being affected
as some existing buyers expressed interest in diversifying their
suppliers for long-term supply," said Ryhana Rasidi, LNG analyst
at analytics firm Kpler.
    "This is somewhat reflected in the fact that a lot of the
new contracts we've seen being signed have been with Oman, Qatar
and the U.S. - whereas very little has been with Australia."
    QatarEnergy, which plans to boost capacity by over 60% to
126 million metric tons per year in 2027, has signed deals to
supply major Chinese buyers. 
    "Australia is the closest gas supplier we can get. By far,
Australia, U.S. and Qatar are the three pillars in LNG supply
chain. If any of them is having problems, we would indeed be
nervous," said Jane Liao, vice president at state-run energy
firm CPC Taiwan.
    As well as its political stability, its proximity to Asia
might be Australia's saving grace, industry analysts say.
    Japanese LNG importers including Tohoku Electric Power
 9506.T , Kyushu Electric Power and Osaka Gas  9532.T  say
Australia is and will continue to be a stable and important
supplier, company spokespersons said. 
    "Ties are very strong between North Asia and Australia as a
legacy supplier, so many participants are keen to continue the
relationship," said Kaushal Ramesh, LNG analyst at Rystad
Energy. 
    "Regulatory annoyance aside, there are still a lot of
advantages."

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Top 3 global LNG exporters    https://tmsnrt.rs/45LQgiF
TIMELINE-Australia's measures to bolster energy security hits
LNG industry     urn:newsml:reuters.com:*:nL4N3AO0YX
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 (Reporting by Emily Chow in Singapore and Yuka Obayashi in
Tokyo, additional reporting by Muyu Xu in Singapore, Andrew
Hayley in Beijing, Joyce Lee in Seoul and Lewis Jackson in
Sydney; Editing by Florence Tan and Miral Fahmy)
 ((emily.chow@thomsonreuters.com; Reuters Messaging:
emily.chow.thomsonreuters.com@reuters.net))