Australia's energy giant Santos reported today record sales revenues for 2022 on the back of the energy crisis in Europe that spurred higher LNG exports from every producer country.
Sales revenues rose 65% on the year in 2022, Santos said, adding its cash flow also benefited from the strong demand for gas, rising more than twofold from 2021.
Unsurprisingly, annual gas production was also at a record level of 105.4 million barrels of oil equivalent.
Santos is the largest liquefied natural gas producer in Australia but last year, before the Russian invasion of Ukraine, its chief executive warned that Australian LNG will not be able to replace Russian gas in case of a conflict between Moscow and Brussels.
The reason, Kevin Gallagher explained at the time, was that most volumes were already contracted by buyers in Asia on a long-term basis. Santos, he said, only had about 16% of its production sold on the spot market.
As later developments proved, however, LNG producers could violate long-term contracts in order to take advantage of the bigger profits made possible by the spot market as Europe rushed to find alternatives to Russian pipeline gas.
Yet the availability of enough LNG for the spot market was not the only challenge for Australian LNG exports last year. Government policies also posed a threat temporarily as Canberra considered caps on exports to secure supply for the domestic market. Eventually, the government struck a deal with LNG producers to make sure there was enough gas for the domestic market and gave up on its export cap idea.
Direct Australian LNG shipments to Europe make little sense except in extreme circumstances because of the freight costs. Germany was in such circumstances at one point because it contracted a cargo of LNG directly from Santos competitor Woodside and it arrived in Germany in November last year.
By Irina Slav for Oilprice.com
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