IEEFA

LNG facility strikes in Australia raise European concerns

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Strike action at three LNG facilities in Australia, a key player in the global LNG market, has raised concerns in Europe as the ongoing dispute between employers and employees could have a significant impact on global gas supply and, by extension, the price of the Dutch TTF futures contracts.

The strike action, taking place at facilities that account for roughly 10 percent of global supply, has destabilized the European natural gas market over the past few weeks.

Europe needs to prepare for the possibility of further instability and price rises as it remains unclear how the ongoing dispute at the LNG facilities in Australia will play out, the Institute for Energy Economics and Financial Analysis (IEEFA) noted in a report.

North West Shelf, an LNG facility run by Woodside Energy, and two Chevron-run facilities, Gordon and Wheatstone, could be affected by the ongoing strike action, IEEFA warned. All three facilities, combined, represent roughly 10 percent of global LNG supply.

Australia, along with Qatar and the USA, represent nearly 60 percent of global LNG supply. Although the majority of Australian LNG exports are destined for Japan, China and South Korea, the disruption caused by the strikes will lead to Asia and Europe competing for LNG.

Overdevelopment danger for LNG terminals in Europe, IEEFA warns

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Major LNG terminals being developed in various parts of Europe, including Greece and Germany, in response to reduced Russian gas supply, could fail to achieve full commercial potential as the continent may end up possessing a far greater number of such facilities than required by 2030, the Institute for Energy Economics and Financial Analysis (IEEFA) has warned.

If REPower EU objectives are attained and Turkish gas demand remains steady, then European demand for LNG will be restricted to a level of just 150 billion cubic meters in 2030, down from 175 bcm in 2022, IEEFA pointed out. At such a level in 2030, LNG terminals in Europe would operate at less than 40 percent of capacity.

IEEFA also stressed that European gas operators have an incentive to over-expand their infrastructure and asset base in order to deliver profits to shareholders, even if projects do not end up being fully utilized.

Existing legislation provides operators with guaranteed revenues collected through tariffs, IEEFA pointed out. Evidence strongly suggests the Russian attack on Ukraine has accelerated Europe’s energy transition by dramatically boosting the penetration of green technologies that reduce demand for gas and LNG, the institute added.