In a troubling overnight development that could further deepen the Gulf energy shock, especially in global LNG markets, a tropical cyclone has disrupted operations at three major Australian LNG facilities, which together account for roughly 8.4% of global supply. The timing is alarming: Iranian strikes have already knocked out about 17% of Qatar's LNG export capacity, with repairs potentially taking years. The Australian outages now add near-term supply risks for buyers, particularly in Asia and Europe, who are already panicking and scrambling for new supplies.
Tropical Cyclone Narelle is bearing down on Western Australia's coastline and has sparked major disruptions across three of Australia's top LNG facilities, including Gorgon, Wheatstone, and North West Shelf (as per Bloomberg):
Woodside Energy Group Ltd.'s North West Shelf export plant in Western Australia had a production interruption due to severe Tropical Cyclone Narelle, according to a company spokesperson.
Meanwhile, Chevron Corp. said one of the three production units at its Gorgon plant was shut, as well as a platform that feeds its Wheatstone facility and domestic gas production.
Following the closure of the Strait of Hormuz and Iranian strikes damaging the world's largest liquefaction plant in Qatar, Australia has become the second-largest LNG exporter, with the US in the top spot.
"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."
MST Marquee analyst Saul Kavonic warned the cyclone "will exacerbate gas market tightness in Asia and Europe, especially if it takes more than a matter of days to normalize Australian production levels again."
Asian LNG prices have soared by 90% since the conflict in the Middle East erupted in late February, and the conflict is set to enter its first month. In Europe, natural gas prices have doubled since the start of the conflict.
The big question now is whether Australia's Gorgon, Wheatstone, and North West Shelf facilities, which together accounted for roughly half of the country's LNG exports last month and about 8.4% of global trade, can resume operations quickly once the cyclone passes. Any meaningful storm damage would risk extending outages, further tightening the global LNG market in crisis, and compounding supply woes for buyers in Asia and Europe.
Amid the chaos, one country stands to benefit (read here).