Australia & PNG LNG producers stand to gain from Russia's pain

Australia and Papua New Guinea gas producers developing or eyeing new LNG projects are set to benefit from constraints imposed on Russian rivals in the wake of Moscow's invasion of Ukraine, analysts said on Wednesday. 

Following the exit of BP, ExxonMobil, Equinor and Shell from Russian oil and gas operations, and with Italy freezing financing of Arctic LNG 2 in Russia, about 11% of future global LNG supply is at risk, Credit Suisse estimated. 

Even Russia's existing 30 MMtpy of LNG, which makes up 8% of world supply, could dwindle in the next few years due to lack of investment, technology and expertise, with the exit of the majors. 

Credit Suisse estimated European buyers may have to look for more than 100 MMtpy of LNG, and planned expansions in Qatar and the U.S. will not be enough to meet that. 

"Much higher price signals may be needed to rapidly diversify away from Russian gas supply within a rapid (around 5-year) window," Credit Suisse analyst Saul Kavonic said in a note. 

LNG contract prices may have to jump back closer to 15% of Brent crude oil prices from around 11% now to encourage new developments, he said. 

For Australia's Woodside Petroleum that improves the prospects for its Scarborough gas project off Western Australia, where it is trying to sell down a large stake and line up LNG customers. Shipments are expected to begin in 2026. 

For Santos Ltd., the shifting LNG market dynamics could boost its bargaining position as looks to sell down part of its 42.5% a stake in the PNG LNG project, run by Exxon. 

At the same time, higher LNG contract prices could spur Woodside and Santos to look at projects that have been stuck on the backburner - including the Browse and Sunrise projects off northwestern Australia and an expansion of Darwin LNG. 

(Reporting by Sonali Paul; Editing by Kim Coghill) 

• Most Read
• Most Commented