Australia’s oil and gas industry providing global energy security
Australia has maintained its position as a global leader in the energy export market, according to the October Resources and Energy Quarterly report.
LNG export earnings were forecast to reach $90 billion in 2022-23, a $20 billion increase from 2021-22 at $70 billion, driven by continued upward pressure on LNG spot markets from the Russian invasion of Ukraine.
Oil prices were forecast to lower in the second half of 2022-23, following multi-year highs in the first half.
“Australian oil export earnings rose by 88 per cent to $14 billion in 2021–22, due to the surge in oil prices,” the report said.
“Elevated prices and a weak AUD/USD should see earnings reach $15 billion in 2022–23. Earnings for 2023– 24 are forecast at $13.4 billion, as prices fall from 2022–23 levels.”
The strong LNG and oil results helped Australia reach a record $450 billion in total resource export earnings forecast for 2022-23, surpassing the previous year’s record of $422 billion.
The report said that there was a higher-than-normal level of uncertainty around the forecasts.
“At $450 billion, the estimate for Australia’s resources and energy exports in 2022–23 is $31 billion higher than the forecast contained in the June quarter 2022 Resources and Energy Quarterly, driven by a weaker than expected exchange rate against the US dollar,” it said.
“Many Western nations are having to pay substantially more for energy, on the high chance that sanctions on Russia will see some Russian production become stranded from world markets.
“Energy prices remain elevated, as the fallout from the Russian invasion of Ukraine exacerbates existing energy shortages. Energy prices (other than gas) will likely fall back in 2023 and 2024, as gains in world supply combine with soft demand.”
The report said oil and gas exports together were forecast to hit $105 billion in 2022-23, an increase from $84 billion in the previous year and the first time it surpassed $100 billion.
APPEA Chief Executive Officer Samantha McCulloch said that the record forecast for LNG exports highlighted the enormous value of the sector to the Australian economy and showed the importance of bringing on new gas supply.
“Strong international demand for our resources is helping governments fund public services and infrastructure while underpinning domestic energy security,” Ms McCulloch said.
“More gas supply means more money for hospitals, schools and roads and more energy security for Australians. This latest strong result for our LNG industry demonstrates the benefits available to the nation if we encourage more investment in supply.
“We have invested as an industry more than $300 billion in LNG export projects since 2010 and the economic returns on that investment are clear to see – employing tens of thousands of people and delivering billions in direct revenues to fund public services.”
The International Energy Agency’s (IEA) Global Gas Security Review 2022 said that the gas crisis triggered by Russia’s invasion of Ukraine in February 2022 caused a series of market adjustments.
“European buyers have strongly increased their LNG procurement, resulting in market tightening and demand destruction in various importing regions,” the report said.
“LNG trade plays a critical role in providing flexibility and security of supply, but tight supply has affected contracting trends. Global LNG trade expanded by nearly 6 per cent year-on-year in January through to August 2022.
“The market was driven by surging LNG demand in Europe, which rose by 65 per cent year-on-year, triggering a wholesale realignment of LNG trade flows around the world.
“The Asia Pacific region, where LNG demand fell by 7 per cent year-on-year as a result of mild weather, high prices and COVID-related disruption in China, has provided most of the relief for the European market so far in 2022.”
The report said that Russia’s invasion of Ukraine triggered deep concern over gas supply security in the European market and had ripple effects in the global market.