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LNG exports – $2 billion for month of May

Oil prices and LNG prices

The good news is that May LNG export revenue is likely to have passed $2.0 billion. According to ABS, Australian LNG export revenue in April (the latest month) was $1.851 billion. The JCC oil price, to which most Australian LNG prices are indexed, has been increasing. The three-month lagged JCC applicable to May was US$55.30/bbl, up on the previous month. The higher oil price combined with 71 cargoes (only 60 in April) could have produced around $2.3 billion in export revenue in May.

Contract LNG prices, based on lagged oil prices, have been rising. The average Japanese import price from Australia in April (latest data) was US$8.29/MMBtu, up from US$7.80/MMBtu in March. Based on the ABS statistics, the average Australian LNG export price in April was $8.36/GJ, slightly below the March average of $8.44/GJ.

The bad news is that oil prices are falling again. Brent, which was close to US$56/bbl back in February, was down to US$50/bbl by the start of May and is US$47/bbl in mid-June. OPEC production cuts have been insufficient to offset rising US production. This has important implications. In terms of export revenue, falling oil prices will counteract increased Australian export volumes from Gorgon, Wheatstone and Ichthys. On the east coast, lower oil prices constrain the capital available for ongoing CSG drilling and domestic gas development, with negative implications for domestic gas prices.

LNG spot prices in North Asia are also falling. As of 1 June the Sling North Asia Index of LNG spot prices was US$5.44/MMBtu for July deliveries, down from US$5.76/MMBtu for June deliveries. Spot prices typically rise in the second half of the year. The forward curve for the Platts JKM Index rises to US$6.71/MMBtu in February 2018 but then softens again into the US$5’s. Production

Australian LNG shipments in May jumped to 4.8 million tonnes (Mt) (71 cargoes), up from 4.0 Mt (60 cargoes) in April. The increase in LNG shipments in May was due to higher production from APLNG and Gorgon and the restart of NWS production after an outage in April. APLNG shipments increased due to the 90-day Operational Test but overall east coast shipments have been reasonably flat this year. (In its justreleased Energy Supply Outlook for the east coast, AEMO has gas –use for the Queensland LNG projects falling since March. This is contrary to both the EnergyQuest shipments data and the shipment data from the Gladstone Ports Corporation. AEMO data on LNG pipeline flows for the same period also shows higher flows in May than in March).

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