MELBOURNE (Reuters) – Australia’s Woodside Petroleum Ltd sees the liquefied natural gas (LNG) market tightening this year, with demand growing especially in Asia, after prices were battered by a supply glut in 2020, its chief executive said on Thursday.
LNG supply in 2021 will be partly tighter as Woodside, Australia’s top independent gas producer, forecast its own output could fall as much as 10% in 2021 due to planned maintenance on two out of the five production units at its North West Shelf LNG plant in Australia.
Woodside’s shares fell 1.5% on its production outlook of between 90 million barrels of oil equivalent (mmboe) and 95 mmboe in 2021 – below analysts’ forecasts of around 96.5 mmboe.
However the company expects to benefit from higher prices this year, Chief Executive Peter Coleman said.
Thanks to a spike in spot Asian LNG prices in early January amid supply disruptions and frigid weather in north Asia, Woodside sold a spot cargo for first-quarter delivery at a record price in the high $20s per million British thermal units. Coleman declined to reveal the specific price.
“We think we’ll see stronger prices throughout 2021 than we had been predicting at this time last year, before COVID,” Coleman told Reuters.
A flood of new supply from the United States which hit the market last year has been rapidly absorbed, due to 4% annual growth in demand for LNG in Asia, underpinned by China.
“The tightening of that market has accelerated and we’ve gone back into (supply-demand) balance now very quickly,” Coleman said. “But for the mid- to long term, we’re also now seeing that the market is going to be balanced through that period of 2025 onwards.”
Woodside anticipates a slew of rivals’ LNG projects that were expected to flood the market from 2025 will not go ahead, as companies will not be able to afford to build them after last year’s earnings slump.
That could be good news for Woodside’s own $11 billion Scarborough and Pluto LNG expansion project, assuming it goes ahead: the company aims to make a final investment decision in the second half of 2021.
