The gas and liquefied natural gas (LNG) market continues to monitor potential industrial action threatened at major Australian LNG liquefaction plants.
Asian spot LNG prices have fallen 7% on the week to approximately $13 per million British thermal units (MMBtu) as of 29 August, on sufficient to high LNG inventory levels.
In Europe, prices on the Title Transfer Facility (TTF) fell 18% to approximately $11 per MMBtu on the week as of 29 August, following a volatile week in week 34 as prices fluctuated between 5% and 14% daily in both directions.

Asian importers maintained a wait-and-see approach following workers voting in favor of industrial action at the Gorgon LNG and Wheatstone facilities in Western Australia.
Gorgon LNG has three liquefaction trains with combined capacity of 15.6 million tonnes per annum (Mtpa) of LNG, while Wheatstone’s two LNG trains have combined capacity of 8.9 Mtpa.
Local independent Woodside Energy announced on 24 August that it reached an agreement in principle with the Australian Workers’ Union and Electrical Trades Union as well as other bargaining representatives on an enterprise agreement covering employees on its North West Shelf offshore platforms.
While most Asian importers currently have comfortable LNG storage levels, an outage at two major Australian projects could impact spot LNG prices if the outages last until peak winter season.

The top destination of Gorgon LNG in 2023 was the PTT-operated Map Ta Phut regasification terminal in Thailand with approximately 1 million tonnes, with Jera’s Higashi-Ohgishima terminal in Japan receiving approximately 900,000 tonnes and 800,000 tonnes discharged at CPC’s Yung-An terminal in Taiwan (China) from January to 27 August 2023.

The top destination of Wheatstone LNG was Jera’s Futtsu terminal in Japan with approximately 1.1 million tonnes, with CPC’s Yung-An being the second-largest recipient at 870,000 tonnes and Jera’s Higashi-Ohgishima facility in Japan receiving 730,000 tonnes from January to 28 August 2023.

In terms of volume, large-scale offtake from companies such as Jera with contracts of over 1 Mtpa from Gorgon and Wheatstone will have significant impact if industrial action materializes in September.
If industrial action does go ahead, a lack of supply from either of these projects could be felt more keenly by importers with smaller annual imports and less alternative long-term contracts from other projects.
For example, Japan’s Eneos has a 15-year contract with US major Chevron that began in 2016 and sees it import approximately 300,000 tpa of LNG from Gorgon, while Japan’s Hokkaido Gas has a five-year contract with Chevron that began in 2022 and will likely see it import a combined 500,000 tonnes of LNG over the period, although the contract does not have a specified origin.

The Ishikari LNG regasification terminal in northern Japan, operated by Hokkaido Gas but also used by Hokkaido Electric, imported 640,000 tonnes from January to July this year, according to Japan’s Ministry of Finance.
The terminal last received a Gorgon LNG cargo on 27 July on board the Asia Excellence carrier.

Meanwhile, Eneos received 65,345 tonnes of LNG at its Mizushima regasification terminal in Japan on 25 July on board the Asia Vision carrier, paying approximately $11.87 per MMBtu, according to Japan’s Ministry of Finance.
The Asia Vision left Wheatstone on 30 June, according to Rystad Energy data.
By comparison, spot LNG for October delivery into Asia is 12.6% higher in price as of 29 August, meaning some Japanese utilities would have to pay a premium in the spot market if industrial action were to result in lower supply to long-term offtakers.

In addition to high gas storage levels, Japan also has additional nuclear and coal capacity this year compared to 2022, meaning that gas-fired power generation will play a smaller role.
Still, significant supply reduction from Australia could tighten supply for city gas, particularly if industrial action lasts for a prolonged period.

In the downstream market, major Japanese power utilities reported on 30 August a combined storage level of 2.01 million tonnes of LNG as of 27 August, some 10% higher on the week, and approximately the same level as the five-year average from 2018 to 2022, although some 27% lower compared to the end of August last year.

In Europe, LNG prices delivered to Northwest Europe fell approximately 20% to between $11.5 and $11.7 per MMBtu as of 29 August, due to persistently high inventory and muted demand.
Europe’s LNG imports in week 34 fell to approximately 1.6 million tonnes, 22% lower compared to 2.1 million tonnes in week 33.
Inventory in the European Union was 92.65% full, with approximately 1,053 terawatt-hours of gas in storage.
Russian pipeline gas volumes into Europe have fallen 3.3% to approximately 94.3 million cubic meters per day (MMcmd) as of 28 August, compared to the previous week.
Norwegian flows were down 31% week-on-week at 227 MMcmd on 25 August.

In the US, Henry Hub gas prices hovered between $2.6 and $2.7 per MMBtu from a week earlier as of 29 August, which is significantly lower compared to almost reaching $10 per MMBtu a year ago.
Storage levels in the US also remain above the five-year average, while above-normal temperatures in the Midwest and the US east could lead to stronger demand for gas-fired power generation.