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Friday, January 27, 2023

LNG as an emergency solution: Australia supplies natural gas to Europe

IWestern Australia’s first LNG ship has docked in Rotterdam, Europe’s largest port. Perth’s Woodside Energy Group sent the Woodside Rees Withers on a voyage of nearly 11,000 nautical miles from the Northwest Shelf to northern Europe off the coast of the mineral-rich country. The client is the state-backed Unipar. The tanker is carrying around 75,000 tonnes of liquefied gas.

Christopher Hein

Business Correspondent for South Asia/Pacific based in Singapore.

Australia is trying to win over Europe as another major buyer of energy. In the foreground is the hope of a future distribution of green or blue hydrogen. With the delivery of liquefied gas, Australia is seeking to demonstrate its close partnership with Europe, but also its ability to deliver reliably in times of crisis. “The events of 2022 have shown that the world cannot take reliable and affordable energy lightly, particularly as we strive to decarbonize,” said Mark Abbotsford, Woodside business head of Northern and Central Europe. It took the ship a month to cover the route to Rotterdam.

As there is still no gas supply chain between Australia and northern Europe, current supply also comes from the spot market. Woodside has a liquefied gas supply contract with Uniper since the beginning of September. But this is equivalent to twelve shiploads of trade quotas being sent from Singapore to Europe. Because a large volume of deliveries from Australia has been sold to North Asia over the years, especially to countries such as Japan, South Korea and China. The shipload from Western Australia to Rotterdam has a particularly high symbolic value. “In times like these, it is even more important that buyers and sellers work together to be flexible in response to market dynamics,” Abbotsford said. Woodside itself did not provide any information on further deliveries on Monday; However, according to analysts, a second tanker was headed for Rotterdam from Chevron’s Wheatstone gas plant in Western Australia.

Interesting but Controversial Business Model

Despite the long journey, this can be an interesting occupation for Australians. On the one hand, due to the development of extremely long supply chains. On the other hand, as LNG prices are currently hovering around their highest levels in seven weeks after a major supply facility went down in the United States and temperatures dropped in northern Asia. Australia exported over 7 million tonnes of LPG in October alone. Analysts estimate the sale of the hundred shiploads at a record price of around 11 billion Australian dollars (7.14 billion euros).

However, the export of gas from Australia is quite controversial: because the fifth continent exports so much that the country with natural resources has skyrocketed prices along the east coast. There, especially industrial customers with contracts expiring at the end of the year, are now increasingly concerned that gas prices will no longer be fair. Politically, it is more difficult to express them than in Germany, for example, because Australia itself has huge deposits. But companies preferred to sell them in Asia at higher prices. The political mistake of not imposing quota on companies to supply in their own country is now showing its effect.

World Nation News Desk
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