LNG projects impacted by oil price drop


Oil and gas stocks are taking a pummelling as investors brace for a wave of capex cuts amid warnings that crude oil prices could sink below $US10 a barrel for the first time in over 20 years.

The Australian Financial Review is reporting prices in the $US20s a barrel for Brent are "already looking almost certain", and the prospect of single-figure prices - last seen in 1998 - "is now pretty inevitable in the coming months unless there are signs of an end to the current stand-off between Saudi Arabia and Russia."

Shipments of Australian LNG to China fell in February as COVID-19 took hold and the oil price plunge is bad for liquefied natural gas ventures because oil prices flow through into LNG contract prices with a lag of about three months. 

It will make it harder to go ahead with new projects such as Woodside Petroleum's $16 billion Scarborough LNG project in Western Australia and Santos's $7 billion Barossa gas project off the north coast, both of which come up for a final investment decision this year.

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