AUS
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Highlights
- New LNG supply expected to flood the market in 2025.
- Government predicts lower export earnings for Australia in coming years.
- Market uncertainties remain due to geopolitical tensions and policy changes.
The landscape of the global LNG market is set for a significant transformation as a wave of fresh supply emerges, potentially lowering prices and altering export dynamics. LNG exporters in Australia, including major players such as Woodside Energy (ASX:WDS) and Santos (ASX:STO), are preparing for this shift. This upcoming surge is primarily driven by increased LNG production from North America, which was initially anticipated to affect global markets in 2024 but was delayed. As a result, 2025 is expected to mark the start of a substantial increase in LNG supply, with further market disruptions likely by 2026.
This increase in supply is expected to put downward pressure on global LNG prices, which are critical to Australia's trade revenue. LNG ranks as one of the country’s top export earners, behind only iron ore. Government forecasts suggest a $5 billion decline in Australia’s LNG earnings in the 2023-24 financial year, down to around $64 billion, and further reductions to $60 billion in 2025-26, significantly lower than the peak of approximately $92 billion in 2022-23.
Despite the gloomy forecast, some analysts remain cautious about jumping to conclusions. Analysts at MST Marquee, including energy specialist Saul Kavonic, point out that an oversupply of LNG after 2026 is likely, but the picture could still change. For instance, delays in major LNG expansion projects—such as the ongoing situation in Qatar, issues with LNG projects under construction, and regulatory delays in the US—could slow the increase in LNG production. These factors may lead to a global supply shortfall of 20 million to 40 million tonnes per year by 2027, according to estimates. As such, the impact on the global supply-demand balance remains uncertain, particularly with fluctuating weather patterns and economic conditions.
In the lead-up to 2025, Adelaide-based consultancy EnergyQuest warns that Australian LNG producers may experience lean years due to the fresh wave of supply entering the market. Nonetheless, it notes that producing LNG continues to be a challenging venture, with significant global developments shaping its future.
Meanwhile, (ASX:WDS) Woodside Energy continues to expand its global footprint. The company, as Australia’s largest LNG exporter, is set to make crucial decisions regarding an LNG export terminal in Louisiana in early 2025. Expected to cost between $9.9 billion and $10.6 billion, this project, alongside the Scarborough LNG project under construction in Western Australia, will strengthen Woodside’s position on the global stage.
As Australia’s LNG sector braces for both opportunities and challenges in the years ahead, it remains to be seen how these market dynamics will unfold, balancing supply, demand, and geopolitics on the global stage.
