LNG exports to China reach record
Australian exports of liquefied natural gas to China defied trade tensions between the two nations to reach a record in 2020-21, with China for the first time overtaking LNG as Australia’s largest customer.
Shipments to China jumped 7.3 per cent to 30.7 million tonnes in the year to June 30, despite strong competition, according to a monthly report from consultancy EnergyQuest, citing import statistics from major buyers.
The trade with China contributed to a record 72.4 million tonnes of LNG exports by Australia to North Asia in 2020-21. It was worth about $15.6 billion, out of a total $38.9 billion trade with the region, The regional total was down from $49.9 billion in 2019-20 due to a drop in oil prices, which most of the sales are priced against, the firm noted.
Fears mounted this year that the souring of relations between Australia and China was spilling over into LNG after unconfirmed reports that at least two of China’s smaller LNG importers had been told by authorities to avoid buying extra cargoes from Australia.
However the data from EnergyQuest supports commentary from Australia’s LNG exporters including Woodside Petroleum and Santos that appetite from China for cargoes remains strong. EnergyQuest CEO Graeme Bethune has consistently pointed to a lack of gas for processing into LNG at several Australian plants as the biggest threat to exports, rather than trade tensions with China or emissions reductions targeted by major Asian nations such as Japan. EnergyQuest noted that exports to China were far above the level of disclosed long-term contracts, which stands at 19,4 million tonnes, signalling that buyers are both taking extra LNG from contracted suppliers in Australia and from spot sales.
Out of the four Australian LNG ventures that have long-term sales contracts with China, three – North West Shelf venture, Shell’s QCLNG and Origin Energy’s Australia Pacific LNG – supplied more than the contracted volume. Also, every other Australian LNG project shipped cargoes to Chinese buyers, even those without specific Chinese contracts.
QCLNG in Gladstone, for example, supplied 6.9 million tonnes of LNG to China in 2020-21, almost double its 3.6 million tonnes of sales contracts, with the additional volumes comprising portfolio sales by Shell that were sourced from the venture.
Japan however imported less than its contractual volume of 31.3 million tonnes, buying 28.3 million tonnes and potentially shipping some of the difference to China, the firm said.
The displacement of Japan as Australia’s biggest buyer of LNG marks the end of an era, given Japan’s status as the original destination for gas cargoes when the North West Shelf venture made its first shipment in 1989.
China is expected this year become the world’s biggest LNG buyer, replacing Japan, but volumes were slightly lower than exports to Japan last financial year, EnergyQuest noted.
Average prices for Australian LNG shipped to China dropped 20 per cent in 2020-21 to $US6.66 per million British thermal units, slightly cheaper than export prices to Japan and South Korea.
Meanwhile, in July, Australian ventures shipped 6.81 million tonnes of LNG, up from 5.85 million tonnes in June, but lower than the record set in March of 7.2 million tonnes. Thirty-two cargoes were shipped to China in July, down by two cargoes from June.
Spot prices for LNG in North Asia, which have been strong throughout the Northern Hemisphere summer, rose further through last month to $US15.70/MMBTU by July 30, and have since risen further to about $US17/MMBTU.
“Prices are being driven by high temperatures in Asia during the summer, preventing storage being refilled after an extended cold winter, and US cargoes heading to South America and away from Europe,” EnergyQuest said.
The strong LNG market has helped drive east coast domestic gas prices higher, to a record average of $14.45 a gigajoule in July at the principal Queensland gas hub, it noted.