Energy crises in Europe and Asia are delivering windfall earnings to Australian oil and gas producers, that are raking in as much as $200 million for shipments of gas.
- Australian gas producers are making as much as $200 million on single cargoes of liquefied pure gas
- Energy crises in Europe and Asia are driving gas markets to report highs forward of the northern winter
- Industry specialists say the state of affairs factors to the function of gas as a balancing gas in swap to inexperienced energy
Prices for pure gas have reached historic highs in current weeks as surging demand for the gas in the Northern Hemisphere collides with tight provides to send the market hovering.
The volatility has led to determined patrons in Asian international locations such as Japan and China paying as much as $US150 million ($204 million) for a single cargo of liquefied pure gas.
Mark Hanna, the chief govt of Perth-based Energy Market Strategies, mentioned the prices have been “unprecedented” and about double the earlier report.
One business veteran additionally famous that LNG cargoes offered for as little as $3 million in 2000 throughout a interval of oversupply.
“It’s the first time this sort of phenomenon has happened,” Mr Hanna mentioned.
“It is a boon.
Perfect storm drives market
Driving the current market has been booming demand for gas in Asia, the place the gas is more and more most well-liked as a cleaner different to coal.
China, in particular, has been scrambling for gas supplies to prop up its power system after moves to clamp down on pollution caused by coal-fired electricity prompted power rationing and widespread blackouts.
Mr Hanna said the market was being further propelled by events in Europe, where there had been a “wind drought”, and Russia was suspected of withholding gas supplies to force through approvals for a new gas pipeline.
“We’ve come off COVID when demand for energy has been suppressed and funding in energy, due to this fact, has been low,” Mr Hanna said.
“Economies have opened up faster and maybe stronger than individuals anticipated.
“There’s geopolitics and climate concerned.
Australian producers ‘cashing in’
Despite the eye-watering prices, Mr Hanna said the ability of Australian producers such as ASX-listed Woodside and Santos was somewhat constrained.
He said most of what those companies produced was sold to customers via long-term contracts, which were invariably set at more conservative prices.
However, he noted the producers typically held back a certain amount of their output for the spot market, meaning they would still be capitalising on the situation.
“And truly, you are going to see a number of returns going to corporations like Woodside and Santos.
“The biggest challenge for them will be how much of their portfolio do they keep open?
“As contracts roll-off, how a lot do they renew, and the way a lot do they go away open to the spot market to make the most of these items?
“So, with energy prices, in short, where’ll they be is God knows. But they will be higher.”
Woodside chief govt Meg O’Neill mentioned the rise of Europe in the LNG market was answerable for a lot of the current volatility.
Higher gas prices ‘to last more’
Ms O’Neill mentioned the market additionally mirrored the significance of gas as a balancing gas in the swap to a renewable energy system, noting it might cushion the inherent intermittency of inexperienced sources such as wind generators and photo voltaic panels.
“The fundamentals are that natural gas is in demand,” Ms O’Neill mentioned.
“This is in part because of the role gas plays in the energy transition – it can generate power with lower emissions than coal, and it can enable broader and more reliable use of renewables by stabilising power grids.
“The near-term volatility confirms the value of long-term gas contracts for both suppliers and customers, given the protection they offer against extreme price fluctuations.
“The long-term certainty they supply additionally helps market situations that allow new initiatives to be sanctioned and developed to make sure a wholesome stability between provide and demand.
“We know buyers require flexibility in longer-term contracts to manage demand fluctuations, and Woodside is able to provide that flexibility.”