Australia hits oil and gas production record, over a billion barrels

Australia’s oil and gas industry has hit new production records with liquefied natural gas (LNG) output expected to continue rising significantly over the next quarter, according to consultancy EnergyQuest.

In its newly released Energy Quarterly September 2019 report, the firm recorded Australian petroleum production lifting 16% year-on-year to pass 1 billion barrels of oil equivalent for the 2019 financial year.

It also posted a 16% boost in Australian gas production to 5,082 petajoules and record LNG output, which was up 22% at 75 million tonnes, or 4,070PJ.

CSG production rose 5% to a new record of 1,461PJ and crude oil and natural gas liquids (condensate and liquefied petroleum gas) production was the highest it’s been since the 2015 financial year, lifting 47% to 81 million barrels of oil equivalent.

While east coast gas production was up 2% to a record 1,865PJ, domestic gas output for the region was down 6% to 563PJ – the lowest it’s been since the 2010 fiscal year.

On the other hand, domestic gas production in Western Australia saw a 2% rise to 401PJ, EnergyQuest reported.

LNG production to rise

According to the report, national LNG production grew 25% to reach 19.3Mt in the 2019 second quarter and is “set to rise significantly” in the third quarter.

This is partly due to Shell’s Prelude floating LNG facility offshore Western Australia commencing shipment of about one LNG cargo each week since June, and the Inpex-operated Ichthys project in northern Australia almost reaching full capacity.

Australian LNG revenue was also up 25% quarter-on-quarter to $11.3 billion and LNG export revenue was up 61% to $50 billion for the 2018-2019 year.

EnergyQuest chief executive officer Graeme Bethune said Prelude has already shipped six LNG cargoes since it came online in June, “further increasing Australian LNG production to over 80 million tonnes by 2020”.

“The bad news is that this is the end of the massive investment in Australian LNG that saved Australia from the Global Financial Crisis,” he said.

“Treasurer Josh Frydenberg is imploring the private sector to increase investment and oil and gas are good ways of doing that, if only the companies are allowed to explore and develop,” Mr Bethune added.

In addition, EnergyQuest noted the “charmed run of Australian projects in terms of export prices came to an end in Q2 2019”.

“After seven consecutive quarters of increase, the Australian average LNG price dropped sharply from A$13.42/GJ in Q1 2019 to A$10.64 in Q2 2019,” the report stated.

Gas prices

According to Mr Bethune, the cheapest electricity and gas can be found in Western Australia and Queensland rather than the southern states.

“This is partly due to the WA domestic gas reservation policy but also due to successful exploration that has found numerous domestic gas fields both offshore and onshore,” he said, referring to the 820PJ Waitsia gas field and Strike Energy’s (ASX: STX) recent discovery at West Erregulla.

East coast short-term gas prices were all higher quarter-on-quarter. According to the report, Brisbane prices averaged $8.72/GJ, while Sydney and Victorian prices were around $9.75/GJ and Adelaide averaged $10.45/GJ.

Mr Bethune said the report also debunks the claim that domestic consumers pay more for gas than Australia’s LNG customers in Asia.

According to the report, the average landed price of Japanese LNG imports from Australia in June was US$9 per gigajoule (A$13/GJ), prior to the costs of regasification, transport and profit margins in Japan.

“The general notion that Australian industry pays more for gas than offshore customers for Australian LNG has also recently been debunked in the ACCC’s Gas Inquiry 2017-2020 Interim report for July 2019,” EnergyQuest stated.