ExxonMobil To Dump LNG Import Terminal Plan In Australia
Zacks Investment Research | Dec 03, 2019 08:39PM ET
Exxon Mobil Corporation (NYSE:XOM) has decided to dump the plan of building a natural gas import terminal on the Victorian coast of Australia, per reports. The energy goliath fell short of finding enough long-term contracts for the project. The company intended to build the terminal to benefit from supply shortage, which is currently affecting domestic manufactures by pushing up costs.
Moreover, the import facility was expected to offset declining production from ExxonMobil’s hydrocarbon fields in the Bass Strait. The company’s scrapping of the import facility plans can lead to rising energy costs due to an impending dearth of natural gas supply in the southern states.
Notably, gas price has climbed to $12 a gigajoule in the market, nearly three times above the historic prices. This has crippled domestic manufacturers as a lot of them are disturbed with a price level of $10 and beyond, per Andrew Richards, the chief executive of Energy Users Association of Australia.
ExxonMobil had gone through an extensive study to gauge demand interests from the domestic market for the proposed LNG import facility, which revealed lesser-than-expected commitments. Amid supply shortage in the domestic market, demand for natural gas is expected to rise in the coming years in Australia. Yet, potential customers are not willing to make long-term contracts with ExxonMobil as they expect government intervention to bring down gas exports from Australia. This can lower gas prices in the domestic market in the short run. Notably, the Turnbull government’s Australian Domestic Gas Security Mechanism could reduce exports and divert supplies to the domestic market.
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