Citi warns of Australian LNG pain

The AFR carries an interview today with Citigroup’s worldwide head of energy strategy, Seth Kleinman that is sobering reading:

“We’re living in a world of restrained capex, whatever corporate speak each individual company throws out; even the Chinese are reining in capex now, which is really not what people were expecting…Marginal projects are getting left behind across the across the entire globe as this sucking sound pulls capex back into the United States.”

Kleinman sees short term upside for LNG prices but warns that oversupply will crunch prices from 2018 when US gas can land in Asia at $US10.50 to $US12mmbtu, all of which is well beneath break even costs for Australia’s magnificent seven projects.

You have been warned (again!).

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About the author

David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.