Fears of a deep recession in Europe are easing, leaving the energy market “finely balanced” for 2023 as China also reopens its economy, the head of Australia’s largest oil and gas group said.
Meg O’Neill, chief executive of Woodside, said the outlook for the sector would depend on the strength of recovery in Europe and Chinese demand for gas after Beijing dismantled the zero-Covid curbs that hampered its economy.
Australian companies including BHP, Rio Tinto and Woodside are seen as good indicators for global demand given the significance of the country’s mining and energy exports to markets including China and Japan.
“The market is finely balanced,” O’Neill told the Financial Times. “There’s still a lot of unanswered questions,” she said of European and Chinese demand filtering into energy markets this year.
Woodside on Monday reported a trebling of annual profit after it completed the integration of BHP’s oil and gas assets. Russia’s invasion of Ukraine also sent gas prices soaring, leading to record earnings for the global industry.
Revenue at the company reached almost $17bn for the year, up from $7bn in 2021, while profit after tax grew to $6.6bn from $2bn. The company paid out a record $4.8bn in dividends for the year.
The results from Australia’s largest independent oil and gas producer reflect a bumper year for the industry after Russia’s invasion of Ukraine sparked a rush to stop using Russian energy and disrupted markets.
Gas prices in Europe have fallen to 18-month lows as fears of a shortage during the winter have eased.
Daniel Hynes, a commodities analyst with bank ANZ, said he expected China’s demand to start rising in the second quarter as industrial activity picked up, while in Europe lower gas prices could slow the reduction in consumption required to offset the fall in Russian supply.
“The spectre of a gas shortfall lingers on,” he said in a note forecasting that gas prices would trend higher in the second half of the year.
Woodside, which is one of Australia’s largest oil and gas producers alongside Shell of the UK and ExxonMobil of the US, said it continued to consult with the Australian government over its intervention in the country’s energy sector.
O’Neill said it was “very hard to say” whether she was confident that the industry and government would reach a satisfactory agreement on plans to shore up the country’s domestic gas supply without damaging its export reputation.
“We want to continue to be a constructive player,” she said, highlighting the A$2.7bn ($1.8bn) that the company paid in tax and royalties in Australia last year.
Woodside shares edged 1 per cent higher to A$32.92 on Monday.