Australia’s largest producers join the cutback bandwagon

Developers have begun delaying new gas projects in response to oil price pressures and further capex cuts may be necessary

Australian independents Woodside Petroleum and Santos have both announced major capex cuts and deferral of several multi-billion dollar LNG projects,  following plunging industrywide oil prices. The downgrade may have been triggered by an escalating oil price war between Saudi Arabia and Russia. But Asia’s spot LNG prices have also been in the doldrums for months—first due to unseasonably warm winter temperatures and then the Covid-19 demand shock, which triggered a Chinese shutdown in January. The combination of demand destruction and market oversupply has driven Brent down to a 20-year low, while the JKM futures prices on the CME are below $3/mn Btu for monthly contracts from May through t