According to EnergyQuest, abandoning oil production cuts at the OPEC+ meeting in early March turned out to be the worst possible decision for Saudi Arabia and Russia.

The Australian LNG Monthly for March 2020 shows that the Brent oil price fell from US$51.31/bbl at the end of February to US$22.24/bbl a month later. It has since rallied to US$30.10/bbl on 15 April following agreement among OPEC+ members to initial cuts of 9.7 MMbbl/d starting on 1 May.

EnergyQuest says lower oil prices will take time to feed through into realised LNG prices. The Japan Customs Cleared (JCC) oil import price was still US$70.60/bbl in February and the drop in spot prices in March will not feed through into LNG realisations until May or June.

“We expect total LNG export revenue for 2019-20 to be around $50 billion, similar to the previous financial year. It is already $38 billion in the nine months to the end of March.”

However, EnergyQuest notes that lower oil prices are likely to have their full impact on export revenue next financial year (2020-21), when revenue could be as low as $30 billion.

Despite the low oil prices, Australian LNG projects can continue to operate. EnergyQuest says “they will not thrive but they will survive”.

“Australian LNG exports continue to be better than expected. Total Australian LNG shipments in March were 6.8 million tonnes (Mt) (101 cargoes), significantly higher than 6.1 Mt (90 cargoes) in February, and more than the 6.2 Mt (92 cargoes) in March 2019.”

The Gladstone LNG producers had a production surplus in March, with total production from LNG producers 6.7 PJ more than total LNG exports.

East coast short-term gas prices in March were lower than those in February and significantly lower than March 2019.

“Short-term domestic gas prices are the lowest they have been since 2016.”

East coast electricity generation was also down by 5 per cent compared with a year earlier.

“It is too early yet to say whether this was due to the overall slow-down resulting from COVID-19. Notwithstanding low gas prices, east coast gas-use for generation was down by 3.7 PJ (25 per cent) on a year earlier and 1.39 PJ compared with February, pushed out by hydro and renewables.”