Australian LNG

Australian LNG has a long history of pioneering investment. From the North West shelf to the first floating LNG project ever constructed.

Like other Australian commodities this history aligns with that of development economics of Asia. The first wave of Australian LNG development grew to service a modernising Japan and its demand for energy.  This bilateral relationship has a long history of cordial relations, share-equity investment and oil-linked contract pricing to satisfy both parties.

The second wave of Australian LNG was far more chaotic, matching the staggeringly swift rise of the much larger Chinese economy. It began along with the pre-GFC oil boom and Malthusian assumption that the world was going to fall short of everything as the enormous Chinese and then Indian middle classes ballooned and consumed more energy per capita.

Multitudinous LNG projects were sanctioned in Australia which found itself by 2010 developing no fewer than seven LNG project simultaneously. Needless to say this did not end well with gigantic cost blowouts for all as they competed for labour and other resources.

Yet, as the commodity super cycle peaked in 2011, demand suddenly fell well short of expectations and kept doing so over the next four years. Making matters worse, the US shale revolution suddenly turned that nation from net LNG importer to net exporter of a magnitude equal to Australian LNG. The global glut from 2015 was enormous.

The Australian LNG boom included a particularly cavalier offshoot in QLD where coal seam gas was liquefied via three projects on Curtis Island. As the boom subsided, and oil-linked prices crashed, the companies involved were all either sold or destroyed.

The legacy left by the projects was one of very high Australian gas prices with very low Asian gas prices, also delivering an huge blow to the competitiveness of the east coast economy. Thus the $200bn investment proved to be the greatest single capital mis-allocation in the history of the Australian economy (and surely global energy markets) and was little more than a monument to Banana Republic economics as tax takes failed, income fell and hollowing out transpired on raised local costs.

MacroBusiness was the only analytic house to call the Australian LNG bubble early, track it and predict its demise. It continues to cover the LNG sector with daily updates and a large grain skepticism and is a must read for anyone that needs to know the economic forces coming to bear on the sector.

Also check – Daily Iron Ore Price, Australian Dollar

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Propaganda push seeks gas reservation stall

Via the AFR: Gas supply on the east coast gas market has dramatically loosened up thanks to record production, bringing down domestic prices and weakening the case for federal government intervention, according to a leading research consultancy. …Despite only a modest rise in LNG exports from Gladstone, the market saw a surplus of 17 petajoules

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Europe debates designating LNG climate hostile

Welcome to the new frontier of LNG doom. Via FTAlphaville: This is a guest post by Rauli Partanen, an author, analyst and communicator on climate change, environment and energy systems. Partanen co-founded and leads Think Atom, a non-profit think tank advocating nuclear energy alternatives. In this post he argues Germany’s interests in natural gas are jeopardising the European Taxonomy for

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Russia shoves giant gas pipe up Aussie energy

From the WSJ journal today: An 1,800-mile pipeline is set to begin delivering Russian natural gas to China on Monday. The $55 billion channel is a feat of energy infrastructure—and political engineering. Russia’s most significant energy project since the collapse of the Soviet Union, the Power of Siberia pipeline is a physical bond strengthening a

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Destroyed gas market dumps LNG imports

It just keeps getting worse for Autralian gas users. Via Domain: Global energy giant ExxonMobil has scrapped plans to build a gas import terminal on the Victorian coast, deepening fears for large energy users about rising costs and a looming supply shortfall facing southern states. …ExxonMobil said it had undertaken an “extensive study” to determine

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COAG Energy Council fails completely

What a bloody joke: Energy Ministers met in Perth on Friday for the first COAG Energy Council meeting in more than 11 months. Here’s some of what happened. First up, it won’t be quite so long between COAG Energy Council drinks next time around – another meeting has been scheduled for March next year. “Technology-Neutral”

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Why isn’t Sun Cable run to Sydney instead?

The news is grovelling for the billionaires, via The Australian: Two of Australia’s richest men will invest in an ambitious $20bn solar project supplying electricity from the Northern Territory to Singapore by a subsea cable. Iron ore billionaire Andrew Forrest – ranked 8th on The List – Australia’s Richest 250 with an estimated $7.34bn fortune,

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Australian energy goes Third World

Today we have a nice demonstration of what happens to long term fixed assets when they are surrounded by ideological mismanagement for long enough. The damage takes decades to manifest but when it comes it is disastrous and there is nobody left to fix it. To wit, the National Electricity Market which is now being

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Scummo threatens to blackout Victoria on his power price fail

Welcome to the new era of partisanship run amok, via the AFR: Federal Energy Minister Angus Taylor will seek to cut deals with “collaborative” states to shore up the destabilised national electricity grid, potentially isolating Victoria over energy and climate policy. …It is understood the bilateral agreements will involve funding or other arrangements to achieve

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Norway runs rings around Australia’s gas idiots

A new report by the Australia Institute estimates that through its sovereign wealth fund’s two-thirds ownership of Equinor, the Norwegian Government stands to make $8.1 billion from oil and gas exploration in the Great Australian Bight, which is greater than Australian taxpayers would make: Norwegian oil company Equinor is planning exploratory drilling for oil and

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OPEC backs off oil cuts

Voia Bloomie: The biggest producers in OPEC+ aren’t pushing for deeper oil-supply cuts when the group meets next month, according to delegates across the coalition. The Organization of Petroleum Exporting Countries and its allies are more likely to stick to their current output targets and encourage members to comply more fully, the delegates said, asking not

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Australia’s gas cartel killer takes shape Outback

Via Bloomie: The answer to the renewable energy industry’s biggest challenge is emerging in the Australian outback. Early next year, one of the first power projects that combine solar and wind generation with battery storage is planning to start up in northern Queensland state. The Kennedy Energy Park, just outside the sleepy town of Hughendon,

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Idiotic gas cartel hollows itself out

It’s both darkly amusing and just as Origin Energy hollows itself out thanks to its monstrous gas gouge: Gas volumes and shipments up and local electricity sales crashing as they are priced out by the same gas shipments sending power prices wild. ORG is cannibalising even itself. Is it any wonder this spectacularly stupid business

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ScoMo pays a billion dollars to drive up power costs

It just keeps getting weirder, via The Australian: An extra $1bn will be pumped into the Clean Energy Finance ­Corporation to turbocharge development of next-generation electricity production and upgrade the transmission network to future-proof the grid and drive down prices. The first new capital provided to the CEFC since it was established in 2012 will

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Centre Alliance: Toughen gas reservation

Via The Australian: High gas prices on Australia’s east coast have underlined the need for potential changes to the government’s gas export curb trigger to ensure sufficient supplies at lower tariffs are available for domestic users, Senate powerbroker Rex Patrick says. Australian consumers were paying 71 per cent more on average for spot gas at

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It’s still cheaper to buy Aussie gas in Japan than it is Australia

Via Goldman: Spot LNG freight rates more than doubled in the past month driven by a combination of contango-driven floating storage and US sanctions recently imposed on shipping companies. With such an increase in freight rates, it is possible that for some market participants currently floating LNG simply discharge their cargo and lease their tanker

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Expect bowel-shakingly low LNG prices in 2020

Via Petroleum Economist: Vitol warns on LNG production shut-ins The trading house fears that US liquefaction plants may join the list of capacity on the side lines next year A market’s price is the function of the cost of the most expensive supply required to meet demand. A low price should indicate at least the

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Aussie gas imports “absurd”

Via Samantha Hepburn is the director of the Centre for Energy and Natural Resources Law, Deakin Law School, Deakin University: Right now, two projects have been proposed to import gas from overseas to supply eastern Australia. This is an absurd prospect. Australia is a resource-rich country, and exports more gas than any other nation. Why then,

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US gas boom humiliates Australian cartel rort

Via the EIA: Source: U.S. Energy Information Administration, Weekly Natural Gas Storage Report Working natural gas inventories in the Lower 48 states totaled 3,519 billion cubic feet (Bcf) for the week ending October 11, 2019, according to the U.S. Energy Information Administration’s (EIA) Weekly Natural Gas Storage Report (WNGSR). This is the first week that Lower 48 states’ working

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Gas cartel lays waste to aluminium industry

Here we go, via AFR: Australian smelters are struggling under high power costs and weak aluminium prices, and their reliance on fossil fuels is also becoming a competitive disadvantage, with Alcoa signalling that reducing its carbon footprint was an important goal of the “review” under way into almost half its global smelting fleet. …Federal Education

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What would President Warren’s “frac ban” do?

Via RBC: We dug deep into the numbers (and mapping) to better assess fundamentals and financial impact  Investors are increasingly concerned about what a frac ban would mean for the oil & gas industry in the US and if this is even possible.  Our rigorous approach analyzed the subject through discussions with industry

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Hedgies drive oil bear to new lows

Via John Kemp comes weekly charts of hedge fund oil positioning which is definitely getting short: But has scope to get materially shorter yet: I still fear a Q4 price crash for oil as falling seasonal demand and wider global growth weakening combine to deliver another period of glut: It is my key trigger for