Australia Pacific LNG (APLNG), the country’s largest liquefied natural gas exporter on the east coast, has agreed to a substantial price reduction under its flagship 7.6 million tonne per annum contract with China’s Sinopec.
The move, anticipated to cost APLNG close to $2 billion over the next five years, is being seen as clear evidence that global shifts in LNG markets are now directly impacting Australia’s gas sector.
The price cut follows a comprehensive review of the long-term contract, which runs until 2035, and comes amid a rapidly changing global LNG landscape.
The contract price, linked to the Japan Crude Cocktail (JCC) oil benchmark, will see its “slope” reduced from January 1, 2025 — a change that Origin Energy, which owns a 27.5 per cent stake in APLNG, says will reduce its underlying earnings by $55 million in the second half of FY25 alone.
While such price reviews are standard for long-term LNG supply agreements, the scale and timing of this reduction are noteworthy.
Market analysts point to a looming global supply glut, driven by a surge in new, low-cost supply — particularly from Qatar — which is already intensifying competition and pushing down contract prices worldwide.
IEEFA estimates that the new contract price could be as low as $13.50 per gigajoule, broadly in line with recent domestic gas prices despite the added costs of liquefaction.
This parity may raise questions about the broader social licence of Australia’s LNG industry, especially as east coast gas users have faced high prices in recent years.
The contract renegotiation is seen as an early indicator of deeper changes ahead.
With mature markets like Europe and Japan seeing declining LNG demand, and growth shifting to more price-sensitive emerging economies, Australian exporters are bracing for sustained competition and potential downward pressure on export revenues well into the next decade.
The price cut is not only a financial blow to APLNG and its partners but also a sign of shifting bargaining power in LNG markets.
Australia’s Minister for Resources, Madeleine King, recently emphasised the importance of balancing export ambitions with domestic needs, stating: “A well-supplied domestic gas market at a reasonable price is fundamental to the social licence of this industry to operate.”
With LNG export returns expected to decline and domestic gas shortages looming, industry observers suggest that exporters would be wise to heed this warning.
As the largest ever wave of new LNG supply comes online globally, Australia’s LNG sector faces a new era of heightened competition, price pressure, and scrutiny over its social and economic contributions at home.
The APLNG-Sinopec price cut may be just the first in a series of recalibrations for Australia’s gas export industry.
