Australia’s existing LNG contracts might be the last
Australian gas exporters may have already signed their final contracts with overseas buyers as new modeling shows a glut of cheap supply and climate targets will reduce demand.
Challenging industry forecasts for strong demand for Australian LNG as developed Asian countries transition and developing countries industrialize, consultancy Climate Resource predicts a decline in demand for imported fuel.
Import demand from Australia’s largest customers is expected to be stable or falling as less gas is used to generate electricity due to emissions reduction commitments, cheap renewable energy and a shift away from fragile fossil fuel supply chains.
The United States and Qatar are also expected to flood the global market with supply in the late 2020s and early 2030s, despite delays caused by damage to the Ras Laffan LNG terminal during the Middle East war.
Additionally, as countries decarbonise, those with domestic gas industries, such as China and India, are expected to prioritize their own supplies over imports of LNG, which must be liquefied, transported and regasified at great expense.
“LNG is the most expensive option and the first choice,” said Anita Talberg, Climate Resource decarbonization lead.
“LNG demand is falling faster than gas demand.”
Future demand forecasts by industry generally focus on total gas usage.
By isolating uncontracted LNG demand, Climate Resource was able to predict whether Australia’s contracts would be renewed or new contracts would be negotiated.
Australia’s network of gas contracts could be the last gas contract sold to buyers, research suggests.
Existing contracts already exceed total global demand by 2027 in the 1.6C scenario, with only modest increases in LNG needed in the 2C scenario; The supply will probably be met by cheaper products from the USA and Qatar.
LNG supply disruptions in the Middle East have caused prices to soar worldwide and brought fossil energy supply chains into sharp focus.
This has led to calls from the industry and its supporters to increase domestic production and exploration in response to the crisis.
Climate Change Investor Group policy manager Francesca Muskovic said the long-term trend continued to point to weakening demand for Australia’s LNG despite the short-term crisis.
“If anything, you will see an acceleration in the trend towards electrification after this crisis,” he told AAP.
“You don’t see any of our Asian trading partners suggesting that the long-term future of their countries and meeting their climate commitments requires increased use of LNG.”
The Australian government’s own modeling points to a decline in the LNG export industry; The value of coal and gas exports is estimated to drop by 50 percent by 2030, according to Treasury figures.
Australia’s Associated Press is the beating heart of Australian news. AAP is Australia’s only independent national news channel and has been providing accurate, reliable and fast-paced news content to the media industry, government and corporate sector for 85 years. We inform Australia.
