Pete Wargent blogspot

CEO AllenWargent Property Buyers, & WargentAdvisory (institutional). 6 x finance author.

'Huge fan of your work. Very impressive!' - Scott Pape, The Barefoot Investor, Australia's #1 bestseller.

'Must-read, must-follow, one of the finest analysts in Australia' - Stephen Koukoulas, ex-Senior Economics Adviser to Prime Minister Gillard.

'One of Australia's brightest financial minds, must-follow for accurate & in-depth analysis' - David Scutt, Business Insider.

'I've been investing 40 years yet still learn new concepts from Pete; one of the finest young commentators' - Michael Yardney, Amazon #1 bestseller.

'The most knowledgeable person on Aussie real estate - loads of good data & charts...most comprehensive analyst I follow in Oz' - Jonathan Tepper, Variant Perception, 2 x NYT bestseller.

Tuesday, 11 October 2016

LNG volumes to rise 40pc in 2016-17

Taking the gas?

With more than $200 billion invested over a decade and Treasury forecasting LNG exports to triple between 2015 and 2021, the prices of oil and gas are about to come to come into excruciatingly sharp focus in Australia!

LNG and crude oil are presently considered to be Australia's fourth and sixth most valuable commodities (iron ore and coal are the real biggies), accounting for 8.8 per cent and 4.9 per cent of the commodities index weights respectively.

In fact, with export volumes rising by +47 per cent to 37 million tonnes in 2015-16, Australia is ultimately expected to become the world's largest exporter of LNG (eek). 

Volumes exported are set to rise further imminently as the second and third trains at Gorgon (that's Western Australia), and the second train at Australia Pacific LNG (that's Queensland), get busily ramping up. 

Export volumes are forecast to increase by 40 per cent to 51 million tonnes in the 2016-17 fiscal year, while an extra 15 million tonnes of LNG export capacity is expected to be ready by the middle of 2017, bringing total operational capacity all the way up to 66 million tonnes. 

At what price? ('Enry's been 'ammered)

It's all happening in terms of production, then. 

LNG prices have ripped strongly higher lately. 

Which is just as well given that prices had collapsed by well over three quarters since the 'bubbilicious' levels that helped to ignite the investment boom to its heady peak. 

With the bulk of exports produced under long term contracts that are broadly linked to the price of oil, earlier in the year prices had fallen to disastrously low levels. 

Were downward pressure on prices to persist then some coal seam gas projects in the Gladstone region may be forced to the wall, or at least forced to operate below their full capacity. In short, not great!

After declining rather horribly over the first five months of this calendar year, prices for Australian LNG delivered to markets in North East Asia at last increased in June. 

The average price of LNG sold into Japan - presently Australia’s largest market and the world’s largest importer - increased by 18 per cent to US$6.51/gigajoule, with the recent uptick reflecting the oil price rally in early 2016.

Crude oil had been smashed to a 12-year low at around just US$30 as the commodity was routed in the earliest trades of this calendar year. 

Mercifully, the Brent crude oil prices continued to recover to a one year high of US$53.45 today. 

Ahhh, never a dull moment in an economy so highly leveraged to a handful of volatile commodities!