Australian gas exporters stand to gain from high gas prices as Russian exports to Europe dwindle and the war in Ukraine intensifies.
A leading investment bank has increased forecast gas prices by 40 per cent for liquefied natural gas (LNG) in Australia's Asian market and by more than 50 per cent for gas in Europe, the world's biggest gas importer.
With the pipeline to Germany already shut, an interruption of Russian gas supply via Ukraine could lead to a loss of seven billion cubic metres of gas supply by March 2023, UBS analyst Tom Allen said.
Already, Europe has "significantly" raised LNG imports to compensate for the loss of Russian piped gas, UBS said.
Australia and Qatar are the world's top LNG producers, followed by the United States.
Western Australia and its offshore waters are home to the North West Shelf, Pluto, Gorgon, Wheatstone, and Prelude LNG projects and the east coast gas market is also a major exporter.
"We expect gas markets to remain tight until prices normalise in 2026 when the next wave of LNG projects come online," Mr Allen said in a note to clients on Thursday.
As the war in Ukraine intensifies, leading North West Shelf LNG producer Shell is doing deals with the Netherlands where a giant gas hub is doubling in size to take more imports and reduce Europe's dependence on Russia.
Last month Woodside signed a decades-long major supply agreement with Germany's industrial giant Uniper for the supply of up to 12 cargoes a year from January, equivalent to one billion cubic metres of natural gas.
Since then, a faster decline in Russian gas exports to Europe is anticipated, where households are being urged to use less energy as governments prepare for a winter supply shock and possible gas rationing.
And despite a sharp rise in coal prices, gas is still more expensive, which could see coal-fired power extended despite a global push to change to cleaner energy.
"This supports further gas-to-coal switching in the power sector, particularly in the coal-dependent countries," UBS said.
"We expect the situation to persist for upcoming years due to the extremely tight gas market."
As stock picks, Australia's Santos remains "most preferred" for UBS ahead of Origin Energy, Beach Energy and Woodside Energy.
