CANBERRA: After spending billions of dollars constructing a world-class LNG export project in Australia, Santos Ltd. has found itself short of gas. The country’s third-largest energy producer, which isn’t pumping enough of its own gas to feed its Gladstone LNG plant yet, is having to buy expensive local supplies to fill the gap. Meanwhile, prices for the LNG that Santos is selling have plummeted by more than half in the past two years amid a supply glut driven in part by rising Australian production. A $200-billion investment splurge has put Australia on track to surpass Qatar as the largest global producer of LNG later this decade. At the same time that so much gas is being siphoned off for export, prices for natural gas within Australia have soared to more than double last year’s level.
“GLNG is in a difficult position,” said Graeme Bethune, CEO of consultancy EnergyQuest, referring to Gladstone LNG. “It’s quite ironic because for years Santos was talking about the need for domestic gas prices to be higher and suddenly they are a gas buyer rather than a gas producer.”
Santos shares rose for a fourth day adding 0.8% to close at A$4.94 on Wednesday in Sydney trading, the highest settlement since June 23. While gas exports have tightened the market and contributed to higher prices, they aren’t the only driver. Prolonged cold weather and the restart of gas-fired power generation also conspired to push up costs, Andrew Smith, Shell Australia’s chairman, said earlier this month. High prices should compel leaders to end state moratoriums on conventional gas exploration, he said.
