Rising oil and gas prices are lifting the fortunes of Australia’s big natural gas shippers, but market enthusiasm for the sector is cooling as investors question the long-term future of fossil fuels in a decarbonising world.

Prices for spot cargoes of liquefied natural gas (LNG), one of Australia’s top exports, are trading at their highest levels in a decade during what is typically the low season for the commodity that usually benefits most from winter heating demand. Brent crude oil prices have also rebounded to pre-coronavirus levels of more than $US70 a barrel.

Australian energy consultancy EnergyQuest described the uplift in global gas prices including the benchmark Asian LNG price, which last year dipped as low as $US2 per million British thermal units during the COVID-19 crisis and are now above $US19, as “extraordinary”.

“It’s very unusual for this time of the year,” EnergyQuest chief executive Graeme Bethune said.

After Asian gas buyers were caught short during a freezing cold snap last winter, analysts say a hotter-than-expected Northern Hemisphere summer increased gas demand to power air-conditioners, and importers were once again stocking up to ensure adequate winter supplies.

The ASX’s top energy producers have all announced a strong recovery in earnings from the shock of the oil price crash last year, and are now pursuing plans for two of the biggest mergers in the history of the Australian oil and gas industry. Santos and Oil Search are proposing to combine into a $22 billion industry giant, while Woodside is acquiring BHP’s global petroleum division spanning Australia, the Americas and North Africa.

Big transactions shaking up the rankings of top industry players would usually unleash excitement in the market, Dr Bethune said, but investors’ reaction this time appears to be the “opposite”. The share prices of all those companies have dropped since the deals were announced, despite the Brent oil price rising or remaining steady.

While many investors have supported the rationale behind the mergers, others have voiced unease, such as doubts about whether the transactions will succeed, concerns about taking on riskier assets and uncertainty over the magnitude of additional clean-up liabilities.

Extracted in full from: Oil and gas sector ‘losing appeal’ even as prices recover (smh.com.au)