Australia's OCE sees higher LNG export earnings

Australia's Office of the Chief Economist (OCE) has revised up its LNG export earnings forecasts for the present fiscal year and the next, given global supply issues and higher than expected prices.

Seasonal pressures — including higher winter demand in Europe owing to lower renewable energy output and an end to Russian gas flows via Ukraine — have increased prices, the OCE's Resources and Energy Quarterly (REQ) March report said.

The OCE raised its expectations for the average LNG price for the fiscal year to 30 June by 10pc (see table), while increasing its forecast for the following year by 14pc from its previous report. Receipts predicted in 2024-25 have been forecast A$8bn ($5bn) higher to A$72bn, while 2025-26 earnings will likely reach A$66bn, up from A$60bn in December's REQ.

Asian demand continues to strengthen, even with Japan and South Korean import levels likely peaking. The OCE noted LNG's growing popularity as a transport fuel in China and record-high Indian imports last year, given increased pressure on power grids.

Higher prices have failed to dampen demand in southeast Asia — including Malaysia, Bangladesh, Singapore and Thailand — while Taiwan's backtracking on renewable targets, coupled with artificial intelligence (AI) and semiconductor sector growth, will increase energy demand there.

Qatari and US investment in new supply will add 5pc to global export volumes in 2025, while demand witll grow by just 2.5pc, but the REQ expects this year's imports and exports will gradually balance.

Greenfield projects

The biggest challenge for Australian projects appears to be a lack of greenfield projects, following the expected completion of the 8mn t/yr Scarborough and 3.7mn t/yr Barossa projects in July-December 2026 and July-September 2025 respectively. The impact of these backfill operations in offsetting gradual declines at the 14.4mn t/yr North West Shelf LNG facility will have ceased by 2029-30, with exports falling by 2mn t/yr to 78mn t/yr.

But oil and gas exploration spending is increasing after years of declines, the OCE said, with onshore search expenditure rising from A$190mn in July-September last year to A$285mn in October-December 2024. Offshore spending rose from A$125mn to A$178mn in the same period, indicating that higher prices are driving greater confidence.

The ANEA price — the Argus assessment for spot LNG deliveries to northeast Asia — for first and second-half May were assessed at $12.96/mn Btu and $12.995/mn Btu respectively on 28 March. The ASEA price — Argus' assessment for spot LNG deliveries to southeast Asia — for the same period was $12.72/mn Btu and $12.75/mn Btu.

By Tom Major

Argus gas prices ($/mn Btu)