A drone strike on a critical Qatari energy hub has sent global gas prices surging, handing a potential windfall to some of Australiaโs largest liquefied-gas exporters but reigniting worries of spiking energy costs reaching households and pushing up inflation.
The Iranian attack, which forced Qatarโs state-owned energy company to shutter a facility that accounts for one-fifth of worldwide liquefied natural gas (LNG) supplies, sent European gas prices soaring 50 per cent on Tuesday and sent shockwaves through markets already jittery about the widening conflict in the Middle East.
LNG prices in Asia are up more than 30 per cent this week already, which could benefit Australiaโs giant LNG exporters such as Woodside Energy if the increases hold, analysts said.
LNG โ natural gas chilled into liquid form to be loaded onto ships and dispatched around the world โ is one of Australiaโs most lucrative exports, accounting for more than $50 billion in earnings a year.
Australia is the third-largest LNG exporter, while Qatar is the second-largest, behind the United States.
If the Qatari shutdown is not lifted quickly, or critical infrastructure at the plant is damaged, it could ignite a โlarger market shock than in 2022โ when Russia turned off its pipeline gas to Europe and unleashed an unprecedented gas crisis, analysts said.
LNG prices could rise โseveral-foldโ, MST Financial analyst Saul Kavonic said, and could โretest their 2022 highsโ.
However, any price surge could also drag costs higher for Australiaโs millions of gas-reliant homes and businesses, as LNG swings partly influence the prices of local supply contracts. Soaring coal and LNG prices in 2022 ultimately contributed to a double-digit electricity bill blowout in Australia and pushed energy-intensive manufacturers to the brink.
Shares in Woodside and Santos, the two largest Australian LNG exporters, jumped more than 6 per cent this week following the closure of the Strait of Hormuz, a major choke-point for about a third of the worldโs oil tankers. Although there is no formal blockade, tankers remain anchored due to heightened security and insurance risks, intensifying supply concerns.
Most of the natural gas exported through the Strait of Hormuz is destined for Asia, particularly China, analysts at commodities research firm ICIS said. Asian buyers would now need to compete for available cargoes from US and Australian suppliers, pushing up prices.
โThis is likely to increase competition for flexible LNG cargoes and drive global prices higher,โ they said.
Rick Wilkinson, chief executive of consultancy EnergyQuest, said Australian LNG producers would benefit from their reputation as reliable suppliers and their location near major buyers in Asia. However, he said Australian producersโ ability to take full advantage of any LNG shortages in Asia caused by the drop-off in Middle East supplies was limited.
โAustralia is already at capacity, with just a few swing cargoes possible.โ Wilkinson said.
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Nick Toscano is a business reporter for The Age and Sydney Morning Herald.Connect via X or email.
