Oz LNG Revenue to Drop 35% in 2020-21

The value of Australian LNG exports is expected to decline by 35% yr/yr in 2020-2021 due to weak prices and export volumes, the department of industry said in its latest September quarter report.

Australian LNG export revenues are set to fall from A$48bn (US$34bn) in 2019–20 to A$31bn in 2020–21, before recovering to A$37bn in 2021–22. About 75% of Australian LNG is sold under contract at prices linked to oil benchmarks.

The department expects Asian LNG spot prices and oil-linked contract prices to gradually recover over the next two years, as the impacts of Covid-19 ease and demand catches up to global LNG supply capacity.

Australia’s LNG exports reached 79mn metric tons in 2019–20, but are forecast to decline to 76mn mt in 2020–21, reflecting the impacts of Covid-19 as well as technical issues at the Prelude and Gorgon LNG plants, the department said. Australian LNG export volumes are forecast to recover to 80mn mt in 2021–22.

The Asian LNG spot price is forecast to increase modestly in 2021 and 2022, averaging over US$5/mn Btu and over US$6/mn Btu, respectively. “Stronger demand is expected to be supported by both a global economic recovery — as the impacts of Covid-19 ease — and a longer term trend for growing demand from China and emerging Asian economies,” the department said. “However, ongoing overcapacity in the global LNG market is expected to constrain the extent of any price recovery over the next two years.”