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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Coalition energy scab grab intensifies

Has a political party ever torn itself apart so spectacularly as the Coalition on energy? The AFR says the NEG will pass the party room: The Coalition party room is expected to endorse the National Energy Guarantee on Tuesday despite last ditch efforts by former prime minister Tony Abbott and former Nationals leader Barnaby Joyce to torpedo the policy.

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Great news, US gas trumps Aussie again

Super news, Aussie gas suppliers have been trumped again by US, via Reuters: U.S. liquefied natural gas (LNG) company Cheniere Energy Inc said on Friday it had signed a 25-year deal to supply Taiwan’s CPC Corp, which CPC valued at roughly $25 billion. Cheniere said it will sell 2 million tonnes of LNG per year

5

The lunacy of gas imports exposed

Via The Australian: Fresh gas shortages on Australia’s east coast could emerge from mid-2019 — two years sooner than official forecasts — due to a sharp decline in Victorian offshore gas production piling renewed pressure on domestic prices, a private firm fronted by former BHP executives has warned. Venice Energy, the Mitsubishi-backed venture that aims

12

Giant LNG pirate ship arrives to plunder Australia

Via the AFR: Shell’s groundbreaking Prelude floating LNG plant off Australia’s far northwest coast has gone “live” ahead of the start of production later this year, chief executive Ben van Beurden has confirmed. LNG and liquefied petroleum gas have both been introduced into the plant in preparation for commissioning and testing of processes and systems

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Australia’s astonishing gas debacle

Via Michael West comes Bruce Robertson is a gas analyst with the Institute for Energy Economics and Financial Analysis (IEEFA): “Australia may soon be importing gas.” What a bizarre, implausible statement. Australia is the second largest exporter of gas in the world. Why would we ever import gas? Our very own Department of Industry, Innovation and Science ranked

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Samter: Embrace imported LNG or doom

Via the AFR: Only LNG imports can save the Australian government from a nightmare scenario of having to choose between breaking gas export contracts with Asian buyers or subjecting the east coast to real supply shortages, according to the respected energy analyst that sounded the alarm on the “slow train crash” looming in the market

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Just do the opposite of whatever the ACCC suggests on energy

Australia’s primary energy market wrecker, the Australian Competition and Constanza Commission, is talking big today: Investors in AGL Energy and Origin Energy are right to be worried about the prospects for their electricity retailing businesses, according to competition tsar Rod Sims, who is leading the regulator’s crackdown on the way the big three players treat their most

0

India squashes LNG shortage drivel

It’s all garbage: India’s renegotiated gas import deal with Russia’s Gazprom will save between Rs 8,500 crore and Rs 9,500 crore over the contract period ending 2040, Oil Minister Dharmendra Pradhan said today. State-owned gas utility GAIL India Ltd had in January taken advantage of the Russian company’s inability to deliver liquefied natural gas (LNG) from the

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ACCC energy idiocy exposed

From Bartho today: It is a measure of the complexity of the issues, the scale and number of the deficiencies and the difficulty of responding to them that the Australian Competition and Consumer Commission’s inquiry into energy affordability has come up with 56 recommendations. It is also a pointer to the convoluted nature of our

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Why would anyone listen to ACCC advice on energy?

The ACCC is breathing fire, via The Australian: The competition watchdog has called for radical reform of the ­National Electricity Market to bring down prices, claiming the gouging of households and business consumers has reached an “unacceptable” level with widespread abuse of market power by the larger energy companies. Recommending the most significant shake-up of

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Macquarie calls out Twiggy gas gouge

I’ve been a lone voice on this as usual but no more. Via The Australian: A spat over gas prices has erupted between the Andrew Forrest-backed consortium planning to build Australia’s first import facility and Santos as concerns grow that the domestic producer may be forced to shelve its controversial Narrabri project in gas-starved NSW.

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Any royal commission into power must include gas

Via The Australian: Malcolm Turnbull is facing pressure from both sides of politics to establish a royal commission into retail electricity pricing, with the Greens to table a bill for a wide-ranging inquiry amid a push by Coalition backbenchers for the Prime Minister to launch an ­investigation into the conduct of power companies. The Greens

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LNG’s final insult arrives

Via The Australian: Rebounding global oil prices are set to deliver an $8.1 billion windfall to export revenue over the next two years, as the nation’s expanding LNG sector gets a double benefit from rising output and higher prices, helping boost export revenues to a record $238bn this financial year, the federal government’s commodity forecaster

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IEA hoses LNG bulls

From the new IEA gas report: Three major transformations are set to shape the evolution of global natural gas markets in the next five years, setting the scene for this Gas 2018 market outlook:  The People’s Republic of China (hereafter, “China”) becomes the world’s leading importer of natural gas. Driven by continuous economic growth

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NSW goes all-in on Twiggy gas

I must be mad, via the AFR: The Andrew Forrest-backed NSW gas import terminal proposed for Port Kembla will have its regulatory approval period fast-tracked by six to eight months, after the state government declared it a critical infrastructure project because of its importance for energy security. The decision is “a powerful demonstration of the

0

Oil market’s OPEC scenarios

by Chris Becker It’s crunch time for the oil cartel as they attempt again to shore up their own individual fiscal black holes by fiddling with the supply/demand curve of black gold. Both Brent and WTI crude prices rallied throughout the latter half of 2017 before a correction in early May this year. WTI: Brent:

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China exempts LNG from trade war

Via the FT: When China last week set out a list of US exports threatened with retaliatory tariffs, almost all fossil fuels were covered, including oil, coal and liquefied petroleum gases such as propane. There was, however, one conspicuous exemption: liquefied natural gas. Beijing’s decision not to impose additional tariffs on US LNG shows the

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What next for oil?

Via the IEA’s OMR: In this month’s OMR, we publish our first estimates for global oil demand and non-OPEC supply for 2019. Rapidly rising prices in recent months have raised doubts about the strength of demand growth, and we have modestly downgraded our estimate for 2018. Prices are unlikely to increase as sharply as they did