LNG Supply Cut Further After Cyclone Hits Australian Plants

The Gorgon liquefied natural gas (LNG) and carbon capture and storage (CCS) facility, operated by Chevron Corp., on Barrow Island, Australia, on Monday, July 24, 2023. Chevron received approval to develop the site into a major liquefied natural gas export facility on the basis they could capture and store 80% of the CO2 mixed in with the fuel, instead of releasing it. Photo by Lisa Maree Williams /Bloomberg

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(Bloomberg) — Three Australian plants that provide about 8% of the world’s liquefied natural gas have had their output curbed by a cyclone, in a further blow to mainly Asian buyers reeling from the halt of shipments from Qatar.

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Karratha, the onshore processing facility that feeds Woodside Energy Group Ltd.’s North West Shelf export plant in Western Australia, had a production interruption due to severe Tropical Cyclone Narelle, according a company spokesperson. Meanwhile, Chevron Corp. said one of the three production units at its Gorgon plant was stopped, as well as a platform that feeds its Wheatstone facility and domestic gas production.

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The disruptions come at a precarious time in the global LNG market after the closure of the Strait of Hormuz and the halting of the world’s largest liquefaction plant in Qatar following attacks by Iran. Most of that supply went to buyers in Asia, who have been looking to offset the shortfalls and are also the most impacted by disruptions from Australia.

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“Temporary shut-ins at Australian LNG plants come at the worst time for LNG buyers looking to replace supply from Qatar,” said Josh Runciman, lead analyst for Australian gas at the Institute for Energy Economics and Financial Analysis. “LNG spot prices are likely to increase on the back of the shut-ins, leading to further pain for buyers.”

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LNG prices in Asia have risen more than 90% since the US and Israel first struck Iran at the end of last month. Gorgon, Wheatstone and North West Shelf accounted for almost half of Australia’s exports last month, or about 8.4% of global trade, according to advisory EnergyQuest.

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North West Shelf’s offshore workforce was evacuated in line with Woodside’s cyclone preparation arrangements and production is expected to recommence after they return, according to the company’s spokesperson. Woodside’s Goodwyn A, Angel and North Rankin platforms are offline, according to people with knowledge of the matter.

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Output continues at the Macedon and Pluto facilities, and Woodside is continuing to supply domestic gas to its customers from its Western Australian portfolio, they said. 

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“Severe weather associated with the passing of Tropical Cyclone Narelle likely caused the interruptions to both Gorgon and Wheatstone operations,” the Chevron Australia spokesperson said in a statement. The Wheatstone outage occurred at 12 p.m. local time on Thursday, while the Gorgon outage was at 3 p.m. local time, they said.

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Meanwhile, a spokesperson for Santos Ltd. said its Varanus Island gas processing facility off the Western Australia coast also “tripped” as Cyclone Narelle passed over the region. Varanus supplies major mining and industrial customers in Western Australia.

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Narelle has had a long track from Queensland, over the Northern Territory, and then across Western Australia, forcing the temporary closure of mines. It is currently a category four storm, with wind gusts of 250 kilometers (155 miles) per hour, according to Australia’s Bureau of Meteorology.

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