Australia's LNG exports to be impact by the coronavirus
Although safe from disruptions so far, Australia’s vibrant liquefied natural gas (LNG) sector could face considerable financial risk from the coronavirus, given that Australia is currently China’s largest LNG supplier.
Having grown into the largest exporter of LNG across the globe, Australia edged ahead of Central Asian economies last year to become the largest supplier of natural gas to China. Australia’s budding LNG sector relies heavily on business from China, particularly some of the larger players such as Shell’s Queensland Gas Company.
“China is an incredibly important buyer of Australian LNG. In January, 36% of Australian exports went to China, just behind volumes to Japan,” said Graeme Bethune, chief executive of EnergyQuest.
EnergyQuest is an Adelaide-based energy consultancy that watches the energy market closely, offering services such as analysis and strategy for businesses, investors and government agencies. According to the consulting firm, vulnerabilities exist, although no tangible issues have surfaced as of now.
“It was pretty much business as usual for the Australian LNG projects in January,” said Bethune. In fact, EnergyQuest data shows that January was one of the more active months for Australia’s LNG exports to China, with 41 vessels transporting LNG over the course of the month. This is up from the November and December figures of 40 and 35 vessels respectively.
The peak was felt by “most Australian LNG companies” in the sector. “The percentage of output delivered to China in January was 85% for APLNG (the Australia Pacific LNG project in Queensland) and 67% for QCLNG (Shell's Curtis Island liquefied natural gas export plant). Most other projects also have significant exposure including Pluto, Gorgon, Ichthys, NWS, Darwin and GLNG.”
However, Bethune warned that as the coronavirus continues to grow as a global health threat, it may start impacting the LNG supply chain. The warning comes within a week after China’s largest LNG importer, the China National Offshore Oil Corporation (CNOOC), confirmed disruptions to its supply chain last week, formally for “unforeseen circumstances”, although insiders on the matters are convinced that the coronavirus is the chief reason behind the disruption.
The revelation has since unsettled the oil & gas trading market, with many players now concerned that other major importers will also wind down their demand. Given the importance of the LNG sector to Australia, disruption to current trade volumes could prove significantly detrimental to Australia’s economy.
According to an analysis by PwC, a reduced flow of people from China due to the coronavirus will deal a $2.3 billion blow to the Australia’s economy.
