Gas export terminals near full capacity amid energy security pact with Singapore
Australia’s massive gas export terminals are operating at near full capacity, leaving little room to increase production and limiting the Albanian government’s ability to offer additional shipments to Asian trading partners in exchange for priority access to oil, diesel and jet fuel supplies.
Prime Minister Anthony Albanese and Singapore Prime Minister Lawrence Wong signed an energy security agreement on Friday; Under this agreement, Singapore reaffirmed its commitment to regular supplies of liquefied natural gas (LNG) to the Australian city-state, while ensuring the continued flow of refined fuels to Australia.
The deal is part of a wider federal strategy to protect Australia from the global energy crisis triggered by war in the Middle East and disrupting the transit of oil, refined fuel and LNG around the world.
Australia, which imports about 80 percent of its liquid fuel from Asian refineries, aims to strengthen its role as a reliable, top-tier LNG exporter to the region as it seeks to strike deals with other Asian governments to ensure continued access to dwindling fuel shipments.
But industry data suggests Australia’s ability to do much more than promise to deliver on existing gas supply contracts will be constrained by the fact that the country’s largest LNG projects – plants that supercool natural gas into liquid so it can be loaded onto ships – are already operating at near full throttle.
Queensland’s LNG production units, known as “trains”, were operating at 94.6 per cent capacity, while Western Australia’s were operating at 98 per cent capacity, according to figures from Australian energy consultancy EnergyQuest.
“Most LNG trains in Australia are operating at capacity; very few can actually swing,” EnergyQuest managing director Rick Wilkinson said.
Iran’s closure of the Strait of Hormuz, a vital oil and LNG shipping route, and drone attacks on a gas hub in Qatar have caused global LNG supplies to be cut by up to 20 percent. Countries across Asia that rely on Qatar LNG for their heaters and power grids are desperate to find replacement cargo to plug shortfalls and are looking to Australia, the world’s third-largest LNG supplier after Qatar, to make up for the shortfall.
Wilkinson said Australia’s ability to continue to be a reliable LNG supplier was “very valuable” in the current market. He said providing assurances that contracts would be honored could be enough to gain leverage in bilateral government talks to procure fuel from countries such as Japan, Korea and China.
Speaking in Singapore, Albanese said more Australian production sites were being developed which could increase supplies to Asia “over a period of time”. But experts said Australia’s ability to alleviate the worsening regional gas crisis was limited in the short term, with little or no LNG volumes to be added to the Asian spot market. Wilkinson said Australian LNG producers could step up to deliver an extra “three or four cargoes” in a market that ships more than 90 cargoes a month.
Western Australia-based LNG operations with the flexibility to provide additional cargo include Woodside Energy’s co-owned North West Shelf project and Shell’s floating Prelude facility, the data shows. Of the three Queensland LNG projects, the Santos-led GLNG initiative has the most spare capacity to deliver additional volumes to Asia. However, it has not developed enough of its own gas reserves to convert into LNG; This means it will need to buy gas that would normally be kept for Australian customers, which could increase domestic prices. Santos’ Darwin LNG facility has increased capacity but is closed for maintenance until later this month.
News last week that the US and Iran had agreed to a ceasefire sent oil markets tumbling, raising hopes that it could be the “beginning of the end” for painful rises in energy oil and diesel prices, with regular unleaded fuel exceeding $2.50 a liter in Australia.
The government and the fuel industry have managed to diversify their supply chains and source oil and fuel from other parts of the world, such as Europe and North America. But unless Australia can successfully negotiate extra deliveries, an imminent supply shortage remains a risk as Asia runs out of crude oil needed to feed its refineries.
On Thursday Energy Minister Chris Bowen said fuel suppliers Ampol and Viva Energy had agreed a plan that would encourage them to buy all the fuel they could. He said taxpayers could hedge their losses if they purchased more expensive cargo before prices dropped.
“This regulation will allow companies to make a non-commercial purchase and purchase this fuel for Australians,” Bowen said.
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Nick Toscano is a business correspondent for The Age and the Sydney Morning Herald.Connect with: X or email.
