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Australia’s natural gas crisis could boost prices

Australia’s natural gas crisis could boost prices

CANBERRA: I wrote a few months back about major problems shaping up in Pacific natural gas markets. With key liquefied natural gas (LNG) exporter Australia threatening to restrict outgoing shipments due to looming domestic shortages.  And this week a couple more key developments came down in this unfolding situation. First, Australia’s LNG exports were confirmed as being one of the biggest stories in global energy. When energy watchdogs EnergyQuest said Tuesday that Australia’s July shipments rose 10 percent compared to June — to hit a record 5.4 million tonnes. Those rising exports are the reason Australia’s politicians are worried about local supply. And this week, major Aussie natgas producer Santos announced it will bow to that political pressure — and divert gas to the domestic market.

Santos CEO Kevin Gallagher unveiled a contract that will see Santos send gas from its Gladstone LNG facility in Queensland to supply markets in South Australia. This deal will begin nearly immediately. With diversions from Gladstone expected to begin as of January 2018. And the sales volumes will be significant. All told, Santos agreed to sell 15 petajoules of yearly natgas supply to South Australia. In the first quarter of this year, Santos sold just 3.3 petajoules of gas on the domestic Australian market. Although the company said it lifted domestic sales volumes to 7.9 petajoules in Q2.  Whatever the case, the volumes under the new South Australia supply contract will be a big increase for Santos’ overall domestic sales. Showing that local pressure is having an effect in changing gas flows here.