According to some estimates, Australia is a few years away from becoming the world’s largest exporter of liquefied natural gas (LNG). The country’s increasing capacity will inevitably intensify the level of competition in the global LNG market. The most threatened countries will be Qatar, Malaysia, Indonesia and Russia, while those to benefit the most will include Japan and South Korea.
Volume Share of Combined LNG Imports to Japan, South Korea and China
Source: Euromonitor International, UN Comtrade
In December, The Telegraph quoted a report by Morgan Stanley, suggesting that Australia could become the world’s biggest exporter of LNG as soon as 2017. For this scenario to materialise, the country would have to surpass Qatar’s exports, meaning roughly tripling current shipment volumes over a four-year period.
According to reports from the US Energy Information Administration (EIA), Australia has three LNG export facilities with a total capacity of almost 1.2 trillion cubic feet per year (Tcf/y), while new LNG plants currently under construction will mean additional capacity of 3.0 Tcf/y by 2017. This compares with Qatar’s current liquefaction capacity of 3.8 Tcf/y.
Australia’s Key LNG Destinations and Main Competitors
The main LNG markets for Australia are Japan, South Korea and China, to which it currently ships nearly all of its liquefied natural gas.
Japan is the world’s largest importer of LNG. The country’s dependence on gas rose further after the Fukushima power plant accident, with lost nuclear capacity replaced by gas energy. Australia currently shares the leading supplier position with Qatar and Malaysia. As of 2012, according to UN Comtrade data, these three trade partners met accounted for over half of Japan’s LNG demand. Other countries with strong exposure to the Japanese market include Russia, Indonesia and Brunei.
South Korea is the second largest importer of LNG. As of 2012, Australia accounted for just 2% of the country’s imports, hence there remains plenty of room for expansion. If Australia strengthens its position in South Korea, the countries facing the greatest losses are likely to be Qatar, Indonesia, Oman and Malaysia.
Another significant consumer of LNG is China. In 2012, Australia met 24% of the country’s volume demand for LNG. Other major LNG providers were Qatar, Indonesia and Malaysia. However, LNG represents only around a half of China’s gas imports. The Central Asian Gas Pipeline brings natural gas to the country in a gaseous state from Turkmenistan, Uzbekistan and Kazakhstan.
Natural gas accounts for roughly one fifth of the energy mix in Japan and South Korea. Moreover, nearly all the consumption of natural gas is accounted for by LNG imports in both countries. Therefore, an increasing supply of liquefied natural gas, which will put pressure on prices, will likely be welcomed by the two economies.
On the other hand, natural gas commands only 4% of China’s energy mix. Moreover, a large share of the country’s demand is served by local production, and the country has access to relatively cheap imported natural gas in gaseous form. As a result, China is much less dependent on LNG.