From the WSJ today comes an overdue examination of the Queensland LNG white elephant:
Big export projects each need thousands of wells to be viable. Unexpectedly weak flow rates at some wells have forced companies deeper into the Australian Outback to hunt for resources.
The process harnesses sophisticated computer-directed drills that pinpoint pockets of gas trapped in coal seams buried hundreds of feet underground. Because salt water mixed with the gas is sucked out to depressurize the seam, the drilling process risks contaminating groundwater used by farmers.
…”There’s still uncertainty from a technical perspective about how well these projects will work, given the complex interaction between a continuous drilling program and liquefaction-plant operations,” said Chris Holmes, a managing director at consulting firm IHS. “When you look at aerial images and see these projects sitting right next to each other, it hardly illustrates the most efficient use of capital.”
As I said several years ago, these projects are going to hammer the parent firm’s returns on equity. Credit Suisse sees Santos’ GLNG delivering a lousy 7% and that’s before the LNG price falls in the future and its long term contracts have to be renegotiated.
Australian LNG was a tremendous bubble. It’s such a shame we don’t have a press to cover it. What a story!
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.
