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Tim Daiss

Tim Daiss

I'm an oil markets analyst, journalist and author that has been working out of the Asia-Pacific region for 12 years. I’ve covered oil, energy markets…

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Australia Looks To Tackle Its Looming Gas Shortage

LNG carrier

In a strange about-face for the world’s soon to be top liquified natural gas (LNG) exporter, Australia is now considering importing the fuel. On Monday, ExxonMobil, Australia’s top gas supplier, said it is considering importing the super-cooled fuel to help offset an anticipated gas shortage from 2021 going forward as well as protecting its market share.

ExxonMobil is also stepping up exploration off the coast of Victoria and considering developing a gas field called West Barracouta close to an existing field, the oil major also said in an emailed statement on Monday.

“Combined with the existing Gippsland resource and infrastructure, an LNG import facility could ensure ExxonMobil can continue to meet our customers’ needs,” the company said, adding that the facility could become operational by around 2022.

Looming gas shortage Down Under

This disclosure comes as Australia struggles with a natural gas shortage, a unique phenomenon for the gas exporting giant. Late last year, the Australian Competition & Consumer Commission and the Australian Energy Market Operator said that gas shortfalls in the country for 2018 and 2019 would be much worse than originally forecasted. They both predicted a shortfall of nearly 110 petajoules of gas in 2018 and similar in 2019, which represents about one-sixth of the projected amount of gas demand in Australia.

In light of this growing problem, late last year Canberra threated to put gas export regulations in place, but the idea has been put on hold as the government and suppliers work out a deal.

However, upping the ante even more, Australia’s energy market operator warned in March that Victoria, the country’s biggest gas consuming state, could face shortages from mid-2021 due to a rapid drop in supply from the Gippsland Basin Joint Venture, owned by ExxonMobil and BHP Billiton, Reuters said in a report. Related: The Fed Is Driving Down Oil Prices

The main reason for Australia’s looming gas shortage quandary comes as the country’s gas field reserves decline and also due to long term LNG contracts inked by LNG producers and customers eager to lock in long term supply deals. Australian producers are also keen to sell more uncommitted volumes in the expanding LNG spot market in Asia, where prices have reached multi-year highs for the super-cooled fuel.

Gas market share collision course

The disclosure also comes as Australia is poised to take the top LNG exporter spot away from current leader Qatar by next year as the country brings to completion several massive LNG export projects. Australia’s LNG export capacity has increased markedly in recent years, increasing from just over 20 million tonnes per annum (mtpa) in 2013 to a liquefaction capacity just under 80 mtpa by the start of next year. This would push the country past Qatar which currently has a liquefaction capacity of 77 mtpa. Last year, Qatar exported 74 mtpa of LNG.

Rising gas export volumes in Australia also means that natural gas is set to become the second biggest Australian resources export by dollar value 2019, overtaking metallurgical coal. Related: Why There Won’t Be An OPEC For Battery Metals

However, with five more LNG export projects beginning construction in the U.S. by 2019, and even more in the process of receiving federal approval amid Donald Trump’s America Energy First push, Australia could give up its soon to be inherited top exporter role to the U.S. by the mid-2020s, perhaps earlier

A report by the International Trade in Goods and Services said last year that LNG shipments from the US are projected to reach 86 million tonnes in 2025 and 115 million tonnes in 2040.

Qatar, also for its part, has vowed to also ramp up liquefaction capacity from 77 mtpa to over 100 mtpa within the next six years, pitting these three gas producing giants on a collision course for not only LNG market share but also geopolitical influence.

By Tim Daiss for Oilprice.com

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