Australia Projects Face Further Delays

The Australian liquefaction projects due to come on stream over the next 2 years have experienced delays during execution of up to 18 months. This is not a surprise given the size and complexity of many of the projects. Moreover, foundation buyers in some of the projects are so oversupplied that they are not anxious to take commissioning cargoes which will increase supply to the spot market. The buyers have no contractual obligations to take commissioning cargoes, and low spot prices and weak demand led some of them to exercise downward quantity tolerance. Woodside Petroleum’s CEO Peter Coleman said he does not see “a lot of assistance coming from the market to increase spot prices over the next 18 months,” during a recent briefing. Gladstone LNG (GLNG) and Australia Pacific LNG (APLNG) should be on schedule to start later this year, while Gorgon, Ichthys, Wheatstone and Prelude are experiencing delays. Gorgon could start in the first half of 2016 instead of December. Further out, three projects targeted for late 2016 are now likely to start up in 2017. These are Inpex operated Ichthys, Shell’s Prelude FLNG and Chevron’s Wheatstone, according to industry sources including project partners. Poten’s latest forecast foresees significant length developing in LNG supply as new liquefaction projects in Australia and the United States come on line over the next two to three years. Weakness in expected demand from several key markets, especially Japan, China and South Korea, could contribute to weak LNG prices over the short to medium term. Poten’s global LNG demand forecast has been revised down by 3 MMt/y to 271 MMt/y in 2016. Lower oil prices are pulling LNG spot and contract prices lower. LNG spot prices may not follow in tandem with a recovery in oil prices as the market adjusts to absorb new supplies, particularly from Australia despite the delays in execution. Click here to read full article