Australia’s natural-gas buyers are poised to pay more even as supply more than doubles in the next five years because higher prices in Asia are spurring exports.
Wholesale purchasers in eastern Australia, who paid A$3 ($2.67) to A$4 per million British thermal units on average over the past decade, are being asked for more than twice as much when they sign new supply contracts or renew existing ones, says Wood Mackenzie Ltd., an energy research company.
The government forecasts gas output will jump to about 100 million metric tons by 2018, or about as much as Japan and Taiwan use in a year. While exports may boost revenue for suppliers including Santos Ltd., Australian consumers such as Incitec Pivot Ltd., the nation’s biggest fertilizer maker, are paying more just as economic expansion slows.
“Australia’s east-coast gas market is now linked to Asian markets through its LNG export projects,” said Chris Graham, a Perth-based analyst at Wood Mackenzie. “There’s an immediate window in 2014 to 2018 when the market is quite tight.”
Buyers in eastern Australia signed new supply agreements last year at A$9 to A$10 per million Btu, according to Graham. Santos, based in Adelaide, said last month that contracts were signed at costs exceeding A$8.
Prices in Australia and Japan, the biggest LNG buyer, are converging once liquefaction and shipping costs of A$5 to A$6 are included, according to the Grattan Institute, a Melbourne-based research group. LNG for delivery to Northeast Asia over the next four to eight weeks cost $18.40 per million Btu, New York-based Energy Intelligence Group said Jan. 8.
Asian spot prices peaked at $19.40 last year as LNG replaced nuclear energy as Japan’s primary source of power following the meltdown at Tokyo Electric Power Co.’s Fukushima Dai-Ichi plant in March 2011.
The country imported a record 87.3 million tons in 2012 and paid 6 trillion yen ($57 billion), double the amount in 2011, according to customs data.
Australia is increasing gas output as fast as suppliers in the U.S., where shale extraction is driving a production boom that has led to prices falling from as much as $13.69 a million Btu in July 2008 to $4.03 today.
Australia will surpass Qatar and Malaysia as the largest exporter of LNG before the end of the decade, the government in Canberra forecasts. LNG is gas cooled to minus 160 degrees Celsius (minus 256 degrees Fahrenheit) so it occupies about 600 times less space and can be shipped by tanker
