King LNG

Last January, Renegade’s Ross Ashcroft and I joked about the possibility of Australian LNG exports to Europe, and more specifically the UK, and we had a good laugh about it. After all, the idea was economically ridiculous.

I remember Ross asking if the British government could really compromise the country’s energy security so badly that it would be ready to pay through the nose for Australian LNG. At the time, I had no answer. Today, I do, though not about the UK. And that answer is yes.

Woodside Petroleum boasted today it had completed its first direct LNG shipment to Europe, under a deal with Germany’s Uniper. The gas was extracted from the North West Shelf project and delivered to a terminal in the Netherlands.

The amount: 75,000 tonnes, equal to 100 million cu m, which is less than what Germany consumes in a single day, based on 2021 consumption figures. What Germany consumes in a single day, based on those figures, is equal to almost 274 million cu m of gas.

The shipment was, of course, hailed as nothing short of a breakthrough, with Woodside emphasising Australia’s role in ensuring global LNG supply security. Only if we are to believe the Japanese trade ministry, this security is kind of an illusion.

A survey among Japanese businesses conducted by the ministry recently showed that the world’s LNG supply under long-term contracts for the next four years is sold out. This should sound alarm bells across Europe but instead, Europe is discussing its Commission’s still-born price cap proposal.

In fact, the Japanese survey’s results should send a shiver down a lot of backs because if they reflect reality — and they probably do — this reality is one where LNG prices could go even higher on the spot market where Europe will be forced to source its replacement gas. Talk about a dysfunctional rebound relationship. And that’s the gas only.