In what has been a tough year the world over, it’s fair to say that Australia will be particularly pleased to see the back of 2020, given the tragic bushfires that it experienced at the beginning of the year. While the land down under has fared far better than many when it comes to the COVID-19 pandemic, there has been recent cause for concern. As I write this, the country has just recorded its worst day for new coronavirus cases. The majority of these new cases were in Victoria state, which is now in its second lockdown. However, there are concerns that the social distancing measures are not working as intended. Victoria’s Premier, Daniel Andrews, recently said that more than half of the people that had tested positive for coronavirus between 7 and 21 July did not isolate: “This means people have felt unwell and just gone about their business [...] They have gone out shopping, they have gone to work. They have been at the height of their infectivity and they have just continued on as usual.”
COVID-19 is now also causing increasing ripples throughout Australia’s LNG sector. A new report by EnergyQuest has found that lower oil prices are starting to feed through into Australian LNG with extended maintenance, cargo deferrals, lower prices, and asset write-downs.1 LNG shipments out of the country were down by eight cargoes in June compared to the previous month, while deliveries to North Asian markets have fallen on the corresponding period of the previous year (70 cargoes were delivered to China, Japan and Korea in June 2020 compared to 77 in June 2019). The report also confirmed that 33 Australian cargoes loaded during June have had their delivery delayed. The carriers have either anchored offshore or are steaming slowly, awaiting final destination orders. Furthermore, Woodside and Shell have announced significant impairments in relation to their Australian LNG assets, primarily due to lower prices. Woodside has written-down the carrying value of its interests in Pluto, NWS Gas, Wheatstone, Sunrise and Kitimat, while Shell has written down the value of QGC and the Prelude FLNG facility.
All of this backs up a recent report from Wood Mackenzie that the LNG industry faces its first seasonal demand contraction since 2012, with demand in summer 2020 expected to fall 2.7% (3 million t) year-on-year. Wood Mackenzie attributes the fall to lockdown measures and the negative economic outlook stemming from the coronavirus pandemic, which have taken their toll on Asian LNG importing countries. Wood Mackenzie Research Director, Robert Sims, said: “The coming winter season (2020 – 2021) could see a modest 5 million t improvement in global LNG demand compared to the previous winter season […] In general, a return to stronger growth is not expected until mid-2021.”
Returning to Australia, this issue of Hydrocarbon Engineering contains a detailed report from Contributing Editor, Nancy Yamaguchi, examining the country’s petroleum sector in light of the challenging year that it has faced. The article considers the transition that Australia’s oil and gas industry is currently experiencing, and whether the events of this year may be the catalyst for change.
- ‘Australian LNG Monthly - July 2020’, EnergyQuest, (15 July 2020).