Australia’s LNG success may be at risk

After a decade of rapidly growing production, Australia now competes closely with Qatar to be the world’s largest exporter of liquefied natural gas (LNG). This is more remarkable given that the Gulf state’s known reserves are 10 times larger than those of Australia, which has only the world’s 13th-largest proven natural gas reserves (2.4 trillion cubic meters, or 1.3 percent of global reserves).Together with the United States, which sits on the fifth-largest proven reserves, these three giants accounted for 61 percent of global LNG trade in 2022. Other exporters have much smaller shares of the market; Russia, the fourth-largest LNG exporter, has less than half the market share of each of the top three.

However, unlike Qatar and the U.S., which have more diversified markets, Australia is highly reliant on Asia, which absorbed nearly all its exports in 2022. Four Asian countries – China, Japan and South Korea (the world’s three largest LNG importers), plus Taiwan – accounted for 92 percent of Australia’s LNG exports last year. Its proximity to the Asia-Pacific region gives Australia lower transport costs than competitors, making for a natural advantage. The Asian continent is also expected to be the main center of global growth for gas demand in the coming years.

But there are downsides to this dependence. Just as consumers try to secure supply by diversifying their sources, producers can secure demand through a diversification of markets, something that Australia clearly lacks. Moreover, Asia is attractive to Australia’s competitors – not only Qatar and the U.S. but also Russia, which is aggressively looking east and boosting LNG exports to compensate for lost European market share following its invasion of the Ukraine.”