(Feb 24): A forecast global glut of liquefied natural gas (LNG) may weigh on prices, but demand growth is strong and supply additions aren’t certain, according to Australia’s biggest LNG producer.
“New supply may place downward pressure on prices,” Woodside Energy Group Ltd acting chief executive officer Liz Westcott said in an interview on Tuesday. However, “expectations of a sustained or structurally disruptive oversupply should be considered with caution”, she said.
The International Energy Agency and BloombergNEF are predicting that new LNG plants in North America and the Middle East may see the market move into oversupply from as early as this year. Former Woodside CEO Meg O’Neill, who stepped down in December to lead BP plc, had pushed for an expansion of production, targeting an almost doubling of operated liquefaction capacity by 2032.
Despite the increased global output, more than 50 countries are now able to import the superchilled fuel and the market is becoming more liquid, Westcott said. Furthermore, some projects higher on the cost curve aren’t proceeding, she said.
Those include an LNG export project in Louisiana that was abruptly halted late last year by Energy Transfer LP.
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There is “continual change in the supply”, Westcott said. Woodside is “very well positioned to navigate any cycle” thanks to its cost competitiveness, geographical spread and marketing expertise, she said.
Woodside has its own US project — Louisiana LNG — and is assessing the potential of a fourth and fifth liquefaction train. It is seeking to sell down a further 20% in the massive plant. In its home country of Australia, Woodside plans to bring the Scarborough LNG project online in the December quarter of this year, which will also add tons to the market.
The firm has not ruled out changes to its oil hedging profile. Currently, about 18 million barrels or 10% of its production is hedged.
See also: Shell in talks with Adnoc, others over Australian LNG stake sale — Bloomberg
“We continue to be open and able to take advantage of price movements, but also be resilient to low price outcomes,” Westcott said.
The gas producer on Tuesday reported a drop in its annual net income because of lower oil and gas prices. However, production rose to a record, helping to offset the impact on revenue.
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