Martin Wilkes discusses Norway’s Hoegh LNG’s plan to target Oz LNG

NORWAY’S Hoegh LNG wants to export LNG to Australia, but a RISC Advisory expert has told Energy News it won’t solve the problem of long-term high contract prices, nor will Queensland’s LNG projects diverting gas to the domestic market.

Anthony Barich | 21 March 2017

Hoegh LNG CEO Sveinung Stohle told Reuters yesterday that Australia was at “the top of the opportunity list” for theas buyers could take advantage of the global LNG glut and its resulting low prices to break the grip of Australia’s big gas producers.

He said Hoegh had just started talking to Australian energy retailers, as it sees big gas users as potential customers, with floating regasification and storage units giving them access to the world market.

Australia’s second biggest energy retailer AGL Energy revealed last November it was already well-progressed in planning a new regasification terminal in South Australia, Victoria or New South Wales by 2021, all of whom are facing gas shortages.

AGL’s other options are continuing to negotiate with Cooper and Gippsland basin producers for long-term competitive supply, expand domestic supply or look at increased storage options.

That idea was denounced by Wood Mackenzie’s Australasia oil and gas lead Saul Kavonic, who sees gas being diverted from the LNG mega-projects as a more economical solution than LNG imports.

He said Queensland’s LNG projects delivering gas to the domestic market may alleviate the situation over the medium term, as some LNG projects may have commercial and operational flexibility to divert gas to the domestic market in response to short term supply outages and price signals.

Meanwhile an LNG import terminal would be an overall economically inefficient avenue to obtain additional supply, given LNG is being exported from the same interconnected market via the Queensland LNG projects, he said.

RISC’s Perth-based principal Martin Wilkes, who was among the first to forecast LNG import plans last September, told Energy News this morning that logically there is gas “potentially available” that could be directed to the domestic market.

However it may not be available in time as the gas still needs to be developed, or contracted.

He said the FSRU option would be much faster and cheaper to install than any fixed facility.

“Personally I think that if you go down the import route then an FSRU is a better option because it might only be required temporarily … if you build an onshore terminal you may end up with a white elephant,” Wilkes said.

“Think back to the USA seven years ago where they built nine import terminals.

“Whether they could match the six-month timeframe of the vessels deployed in Egypt and Turkey is questionable, but it could be pretty quick.

“Other countries are both importers and exporters – including the USA, which still imports a small amount to the north-eastern states because they can’t get gas there in times of high demand.”

While this sounds similar to the problems Australia’s east coast is facing, Wilkes said the LNG import option still “doesn’t really solve the issue of long-term high contract prices, or the ability of users to contract at prices they can afford, and I think this may be more of a problem than supplying peak demand”.

Meanwhile, Wood Mackenzie estimates that Santos’ $24 billion Gladstone LNG project will hoover about 20% of the gas expected to be available this year for domestic gas users on the east coast.

Santos, which needs third party gas more than Queensland’s other two LNG mega-projects, appeared to have been exempt from upping its gas to the domestic market after a meeting with Prime Minister Malcolm Turnbull last week.

GLNG could only take the matter “on notice”, while Shell and Origin Energy committed to selling more gas locally from Queensland Curtis LNG and Australia Pacific LNG respectively.

“GLNG is in a difficult spot here, having to choose between complying with the pressure to supply to the domestic market, and maintaining gas feedstock to salvage what value it can from its investment in GLNG,” Wood Mackenzie analyst Saul Kavonic said.

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