INTERVIEW: Australia's LNG exports expected to hold steady in 2025, says EnergyQuest CEO

Australia's LNG exports are expected to remain steady year over year in 2025, with no new domestic projects starting this year and the next major development, the Scarborough project, set to deliver first LNG in 2026, EnergyQuest CEO Rick Wilkinson said.

"There is simply no oversupply in the country presently that is looking for a new market," Wilkinson told Platts, part of S&P Global Commodity Insights, in an interview.

"Control mechanisms are in place, with the federal government allowed to control exports of the fuel under the Australian constitution. So, that is ultimately a big stick that they wield," Wilkinson said.

Australia's LNG shipments reached 82 million mt in 2024, surpassing 81.1 million mt in 2023 and the previous record of 81.3 million mt in 2022, according to EnergyQuest, a domestic consulting company.

While exports have risen slightly, significant growth is constrained by unfavorable gas policies and domestic interventions, such as DomGas and the Australian Domestic Gas Security Mechanism.

Australia could become an LNG importer in the future, though it is expected to remain a net exporter, Wilkinson said, adding that some states may source supplies from Western Australia rather than overseas.

"LNG is just a way to ship gas long distances, typically more than 1,500 to 2,000 km. Once you go past that, gas is cheaper to move as LNG as opposed to pipeline gas when you have a marine option," he said.

"So, in the middle of winter, when you get consumption spikes and you don't have as much solar, or if hydro runs short of water, then you don't have many options to meet peak demands; LNG imports can serve as a great peaking gas," he added.

Some states are already taking steps to clear hurdles for gas imports as potential shortages loom.

On May 29, the Victorian government issued a positive assessment of the Environment Effects Statement for Viva Energy's LNG terminal in Geelong.

The terminal would have the capacity to supply more than 120 Pj/year of gas and introduce significant new supplies. It is aimed at addressing "structural gas shortfalls forecast to impact Victoria from 2028 onward," Viva Energy said in a statement last week.

Meanwhile, Australia is unlikely to be directly affected by global market volatility driven by geopolitical risks or tariff uncertainty, as more than 90% of its overseas LNG supplies are tied to long-term contracts, Wilkinson said.

Delivering against commitments

"We are always concerned about the difference between what is announced and what is delivered. So, we will watch that very closely," Wilkinson said.

"I think, generally, the intervention was seen as unsuccessful because the price movements that we saw in Australia were also like those in Europe, although the latter did not pursue the same intervention that was here in Australia," he added.

Additionally, the intervention signals to investors that the Australian government is willing to step in at a certain gas price, which effectively limits the upside for price increases.

The intervention also dampens investment in storage infrastructure expansion, which is crucial for managing constraints and peak demand in the domestic market, Wilkinson said.

This is especially important in southern Australia, where the domestic gas market can swing sharply. In Victoria, for example, demand can rise from 300 Tj/d to over 900 Tj/d heading into winter, with residential use accounting for a significant portion, he added.

Regulatory certainty is also vital, and once environmental and exploration permits are issued, they should not be subject to further negotiation or changes.

"If you are trying to stop a project, or you are against the project, the best thing you can do to mess it around is to challenge it late in the day because then the supplier not only ends up incurring substantial costs but also risks the various offtake agreements and commercial arrangements," Wilkinson said.

Gas market intervention also does not bode well for overseas equity investors, who are concerned about accessing their equity through gas and LNG supplies -- the very basis of their investment, he added.

"So, it is a complicated political path that needs to be negotiated," Wilkinson said.

CCS potential

Australia has vast storage potential in sedimentary basins, capable of holding up to 16.5 billion mt of CO2, according to Wilkinson. However, only two carbon capture and storage projects -- Moomba and Gorgon -- are currently operational.

CCS activity has also stopped in Queensland, where the state government has blocked CO2 storage in reservoirs linked to the Great Artesian Basin, which underlies two-thirds of the state, Wilkinson said.

There is a strong need for such technology to support decarbonization now, but the cost of carbon in Australia is not high enough to make it economically viable -- except for a few projects, he added.

"For CCUS [carbon capture, utilization and storage] to be successful, you need a good, concentrated CO2 stream and reservoirs that are good for injection purposes, and you want to keep the transportation distances short," Wilkinson said.

Collaboration with the government and within the industry, possibly around carbon hubs, is necessary to reach critical mass and keep costs low, he added.

Meanwhile, Wilkinson said it is important to be aware of international competition from countries like Malaysia and Indonesia.

"To bring CO2 from, say, Japan or South Korea, you must go past Malaysia, which has depleted reservoirs and has the expertise and the technology, and then you have Indonesia, too," he said.

"So, you have passed two or three potential opportunities for CCUS, making it even more important to keep that competitive edge," he added.