LNG exports risk going ‘from hero to zero’

Government forecasts of continuing LNG exports from Australia through to 2050 despite the net zero goal are too optimistic given the gas reserves underpinning exports will be exhausted by then, EnergyQuest says.

Estimates by the International Energy Agency and Morgan Stanley are also too bullish based on existing reserves, according to sobering analysis by the consultancy; its monthly LNG report also found that Australian LNG exports hit a record in October.

“In the absence of new fields and new projects, Australian LNG exports in 2050 are likely to be zero in 2050,” EnergyQuest said.

“This is not because of net zero or potential lack of demand but because of insufficient developed natural gas reserves.”

The Woodside-managed North West Shelf venture, the country’s oldest LNG exporter, could run out of reserves by 2028, followed by Chevron’s Wheatstone by 2033, Shell’s Prelude and Santos’ Darwin LNG by 2044, and Inpex’s Ichthys, Chevron’s Gorgon and Woodside’s Pluto and Scarborough by 2049, the firm said.

EnergyQuest’s findings consider recent downgrades in gas reserves at Woodside’s Wheatstone fields and at Pluto, which analysts have calculated shorten the lives of those fields by several years, which has raised concerns about potential further write-downs to come at other Woodside fields.

The firm said Australia has plenty of potential to deliver net zero LNG cargoes as it has already done, but still needs the gas reserves to do so.

The IEA’s net zero report in May said Australian LNG exports would still total 21 million tonnes a year by 2050, well down on current levels of almost 80 million tonnes but still far from zero. The federal government’s modelling for its net zero plan suggests gas exports in 2050 will be higher than in 2020.

But EnergyQuest said that unless undeveloped gas fields are explored and developed “Australia runs the risk of going from hero to zero, with 10 empty LNG projects in less than 30 years”.

“Hopefully Australia will be exporting net zero hydrogen too, but it would be folly to give up on something the country can already do, including in a net zero world,” it said.

Last month, however, Australian LNG projects shipped a record 7.23 million tonnes of LNG, in 105 cargoes, beating the previous record reach in March.

That represented LNG export revenue in October of an estimated $5.21 billion, up from $4.9 billion in September and almost three times as much as in October 2020 after a turnaround in prices.

Demand in China builds apace, with Australian projects delivering 38 cargoes there last month, six more than in September.

EnergyQuest noted that despite high LNG spot prices in Asia, domestic gas prices were steady at Queensland’s key gas hub last month, averaging $8.28 a gigajoule, the same as in September. Prices in Sydney and Victoria were higher than the previous month, while prices dipped in Adelaide.

Power generation from coal fell to a record low for this time of year, representing only 60 per cent of generation in the National Electricity Market, EnergyQuest said. Gas power generation also fell, supplying only 4 per cent of the total.

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