By Sergey Manukov
Slightly forgotten in recent months, gas is back on the list of potential threats to the global economy. It is noteworthy that the event in distant Australia, which reminded everyone of gas, with which everything seemed to be in order, judging by the prices and the fullness of underground gas storage facilities in Europe, has not even happened yet and theoretically may not happen at all.
Demand for "blue fuel" in the northern hemisphere is still low. The heating season is still a couple of months away, but the prospect of an extended shutdown of Australia's major liquefied natural gas (LNG) plants has sent gas prices skyrocketing. At the same time, it was superimposed on extreme weather conditions this summer in many regions north of the equator, as well as problems, unfortunately, that this summer also appeared in a number of other large gas producers, writes Bloomberg.
Potential strikes at Australian LNG plants are a classic example of a serious problem that came at the wrong time. In Australia, the gas industry is struggling to reach an agreement with management to raise wages at three Chevron Corp. LNG plants. and Woodside Energy Group Ltd., which account for St. 10% of world gas exports. Negotiations will continue this week, and no one undertakes to predict their outcome. In order to better imagine the threat posed by strikes in Australia to the world's gas supply, suffice it to say that these plants have more than 2.5 times the capacity of the infamous Newport LNG terminal where a fire last year last year, which put it out of action for a long time which contributed a lot to breaking the gas price record in Europe at the end of August 2022.
Even after last week's nearly 40% jump, gas prices are a long way from last year's August high prices, but the now-familiar gas price volatility means that consumers should likely expect more nasty gas bill surprises this winter. Plus we are talking, of course, not only about the population, but also about industry, first of all, about energy-intensive industries such as metallurgy, the chemical sector, fertilizer production, and so on.
Asia is now watching the progress of negotiations in distant Australia with special attention, because due to its geography, this continent is the main consumer of Australian gas. You don't have to be a gas expert to predict a sharp increase in competition for gas if a compromise at the negotiating table is not reached and strikes start in Australia. At the same time, gas prices, of course, will rise not only in Asia, but also in Europe.
According to Claudio Stuer, director of SyEnergy Consulting, if the strikes at Gorgon, Wheatstone and North West Shelf LNG plants last a month, supply will be reduced by 3 million tons of LNG, or about 44 LNG carriers. Japan, Thailand and Taiwan will be hit the hardest, providing almost a quarter of all gas imports from these three Australian plants, according to Independent Commodity Intelligence Services. In addition to these countries, they provide 14% of Chinese imports and 28% of Singapore.
The consequences of interruptions in gas supplies from Australia are reinforced by the fact that gas supply problems are now almost everywhere. For example, LNG exports from Russia decreased due to the recently launched planned maintenance at two large LNG plants. The LNG plant in the Caribbean island nation of Trinidad and Tobago is closed for most of August due to preventive maintenance. Due to abnormal heat and a sharp increase in domestic consumption, Egypt stopped almost all exports of liquefied gas. As always, low due to problems with the security of gas supplies from Nigeria. In general, the third quarter is the traditional time for maintenance work. They will take place at many LNG plants, including another one in Australia, the Prelude floating LNG plant, which produces 3.6 million tons of liquefied gas per year.
In the event of strikes in Australia, everyone will again rush for gas to America, which is now the largest exporter of liquefied gas. But even here the timing is not the best, because in the Gulf of Mexico, the location of the main part of the American LNG infrastructure, the hurricane season is about to begin. Moreover, as the temperature of the water in the oceans rises, so does the likelihood of an increase in the number of strong hurricanes, which will most likely disable a significant part of American LNG plants for some time.
The tension in the gas markets will rapidly increase as the heating season approaches. Rising gas prices, just like last year, will force some buyers from poor countries, including India, to leave the spot market. The presence of Pakistan, a populous country with a chronic shortage of electricity, is already in question.
“This situation in a tight LNG market could lead to increased competition for limited LNG supplies between the main regional buyers and a sharp rise in prices,” Stuer said of the impact of strikes in Australia. “It will be a holiday for traders, of course, because no one knows what prices will be.”
This article originally appeared in Russian at expert.ru