China becomes Australia's biggest LNG customer

CHINA has officially overtaken Japan as Australia's biggest gas customer, importing a total of 32 million tonnes of LNG in 2021, up 7.1% compared to the year before.

EQ sees the Australian LNG horizon

EQ sees the Australian LNG horizon

The figure represents roughly one-third of Australia's total LNG export capacity of 80 million tonnes shipped in 2021, EnergyQuest said in a note last week. 

"Growing LNG sales to China reflect the rapid growth in Chinese natural gas demand as the economy has recovered from the pandemic and also the push to reduce air pollution in major cities," EQ said. 

All Australian projects, with the exception of Shell's Prelude, delivered cargoes to China last year - the two biggest suppliers being the east coast's ConocoPhillips and Origin's Asia Pacfic LNG project and the QCLNG project, operated by Shell. 

EQ noted that LNG deliveries also grew to Korea and Taiwan; however, deliveries to Japan were down 9.3% in 2020, largely due to the expiration of Japanese contracts with Woodside's North West Shelf and Santos' Darwin LNG.

The analysis firm however said that the lost Japanese sales were effectively offset by higher-price spot sales. 

China overtaking Japan as Australia's biggest LNG customer has been previously flagged by multiple Resources and Energy Quarterlies, pointing to China's surge in demand as Japan's own demand wanes as it looks to meet its 2030 decarbonisation targets which sees gas replaced by renewables and a restart of its domestic nuclear power industry. 

However, EQ has previously noted that China has been looking to diversify its LNG supply, signing new contracts with Qatar and the US, while Australia has largely missed out. 

This has caused outcry in some quarters as Australia's status as the world's biggest exporter of LNG is now under threat. 

EQ said earlier this week that 2021 was likely the peak of Australia's LNG production, not only as a result of increasing competition but also due to the natural decline of the nation's gas fields and the limited number of new projects. 

Last year saw two new LNG projects sanctioned - Woodside's Scarborough gas project, due in 2026 and Santos's Barossa backfill project, due in 2025, however by then other LNG trains are likely to have been shuttered, most notably at Woodside's North West Shelf. 

"The best-case scenario would be that these two new projects bring Australian production back up to around current production levels," EQ said. 

"They are unlikely to take it up to new levels. Reaching new levels would require new sources of gas to turn around the decline in the North West Shelf, Australia's largest LNG project." 





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