Australia Holds Talks with Key LNG Buyers

Australia's government has held talks with the governments of Japan and South Korea, two of its key LNG buyers, on the post-Covid-19 economic recovery, it said in a statement on June 2.

Australia's resources minister Keith Pitt met with Korean energy minister Sung Yun-mo via video link on June 2, to discuss the pandemic and progress collaboration on hydrogen and critical minerals. A month after he met with Japanese minister Hiroshi Kajiyama to discuss similar issues, as well as energy security.

According to the statement, Pitt stressed that the resources sector was well positioned to lead the economic recovery, but there was no reference to long-term gas sales and purchase agreements.

"Australia is a stable supplier and our resource industry is showing great resilience during the pandemic. Australia is working closely with its resource trading partners during the Covid-19 pandemic," the minister said. "The Republics of Korea and Japan are both important energy and resources partners and these meetings are invaluable in terms of collaborating on shared issues and cementing our relationship."

LNG spot prices have slumped to historic lows as a result of Covid-19's impact on demand, exacerbating a supply glut that began emerging last year. This is set to cause some friction between sellers, which will want to continue supplies under standard long-term contract terms, and buyers, which will want to pay lower spot prices. Many buyers will also want to take less LNG owing to lower industrial demand, but take-or-pay clauses with minimum yearly volumes are also standard features of long-term contracts.

Japan and South Korea accounted for $73bn of Australia's resources and energy export market in 2018 to 2019. 

"The strength and diversity of Australia’s resource and energy commodities have allowed export earnings to overcome challenging world economic conditions — to the benefit of the Australian economy," Pitt said.

Similar meetings are scheduled to take place with Australia's other key trading partners, including China.