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.
Via Reuters: South Korea’s Korea Gas Corp has entered court-administered arbitration with Australian joint venture North West Shelf Gas seeking to settle a dispute over a liquefied natural gas (LNG) contract that expired in 2016. A spokesman for the state-run Korean firm, known as KOGAS, confirmed an arbitration process was under way but declined to
From the new IEA OMR: This month’s OMR is abbreviated to allow time for us to complete our annual five-year outlook that will be published in our report Oil 2018 on 5 March. Meanwhile, new and revised data shows a modest tightening of the balance in the early part of 2018, but the main message remains unchanged
But we’re getting a little taste of it now, via AFR: The unexpectedly tight liquefied natural gas market in Asia is complicating Australian regulatory efforts to prioritise the domestic market for east coast gas, helping drive up local prices for the fuel in January despite soft demand. Imports of LNG by Japan, the world’s biggest
The Coalition has become little more than a fistful of lies on every topic you can imagine. Today we add the efficacy of its non-policy on gas reservation, via The Australian: The Turnbull government says it has met its objective of halving domestic gas prices, while reassuring overseas gas buyers of the reliability of Australian
From ORG today: The worthless $80bn LNG white elephant is the gift that keeps on giving. It runs at huge all-in cost losses triggering these write downs, while operating at fabulous cash break even gains thanks to drip feeding gas into the east coast economy. This write down is not paid for by shareholders, it
Bang! Here it is: More from John Kemp: U.S. crude oil production is set to increase by more than 1.2 million barrels per day in 2018 compared with 2017, according to the latest short-term forecasts from the U.S. Energy Information Administration. U.S. crude production will average almost 10.6 million barrels per day (bpd) this year
Via Reneweconomy: On Sunday, January 14, something very unusual happened. The Australian Energy Market Operator called – as it often does – for generators in South Australia to provide a modest amount of network services known as FCAS (frequency control and ancillary services). This time, though, the market price did NOT go into orbit, and
Via the SMH: Australian households could be paying as much as $430 more for electricity by the end of next year unless wholesale gas prices are brought under control, according to a new report that warns the Turnbull government’s energy policies are falling short. Policy analysts at the McKell Institute have for the first time
I have been partially supportive the National Energy Guarantee notion on the proviso that it uses an appropriately stringent energy intensity cap but it’s looking more and more like it was just another Turnbull brain fart. Nobody I know can figure out how it will work. Not least because at this stage nobody knows what
From Cartel Canavan today: Bass Strait is declining as a supplier of cheap and affordable gas. We have been fortunate that gas production has increased in other parts of Australia, like the coal-seam gas fields of Queensland. These fields are the only reason that we can respond to the falling production in Bass Strait. This
Via Herald Sun: BLACKOUTS plagued more than 60,000 homes statewide at the weekend despite Victorians being slugged hundreds of dollars a year in fees to maintain the electricity network. The average household will pay from $404 to $673 in tariffs for poles and wires this year, a sum that can account for 20 to 40
Via Herald Sun: VICTORIANS have suffered the biggest hike in gas prices of anyone in Australia. Just two years ago, Victoria had the cheapest wholesale gas price. Now, it has the costliest. Victorians, the nation’s biggest residential users of gas, endured a doubling of the wholesale price paid in 2015 before the cost dipped slightly
Via AFR: As of the end of December, there were 4,417 megawatts of renewables projects under construction around the country, up by almost 500 MW from a month earlier, according to data released on Thursday by Green Energy Markets, an adviser on clean energy. Wind farms under construction will produce twice as much power every
There are times when the human body is not cut out for dealing with the rage-inducing Australian politician: Federal Resources Minister Matt Canavan is scrambling to reassure some of Australia’s biggest LNG investors and customers in Asia about the new domestic gas security policy, amid fears it may cause lasting damage to multibillion-dollar project investments
Gottiboff is at it again today: There is a simple way to put eastern Australia on the track to much lower gas and power prices: appoint Peter Dutton as energy minister for a day. Australians, and particularly Victorians, are not being told the truth of how vast reserves of low cost gas are being concealed
Via Domainfax: Based in the outer Melbourne suburb of Bayside, ANCA is one of an increasingly rare cohort of Australian manufacturers. The precision tool manufacturer employs more than 1000 staff globally, with 450 in Australia, and turned over $180 million last year, but when its power supply contracts were up for renewal co-founder Pat Boland
Via Reneweconomy: AGL says no private investor would invest in new coal plant, but says battery storage is coming and will be major game changer as costs fall – which may not be far away. Several days after formally rejecting federal government requests that it invest hundreds of millions of dollars to keep the ageing
From the AIG: “The ACCC’s latest gas market update confirms that the gas crisis has shifted down a gear since early 2017 – but it also confirms Australian industry’s concerns that we are still far from affordable energy,” Australian Industry Group Chief Executive Innes Willox said today. “More supply is clearly being made available in
Via the ACCC today: This is the second interim report of the Australian Competition and Consumer Commission’s (ACCC) inquiry (‘the Inquiry’) into gas supply arrangements in Australia. The ACCC is focussing on the operation of the East Coast Gas Market, where there are continuing immediate and longer-term concerns. In the September 2017 report, the ACCC
From the always useless manufacturing lobby: The nation’s biggest manufacturers have called for an electricity price target after energy giant AGL said replacing the Liddell coal-fired plant with a green energy mix would need power prices to be higher than they have been recently in NSW for a new plant to be profitable. AGL at
From the AFR: AGL Energy has rejected Turnbull government pressure to extend the life of the coal-fired Liddell power station and instead revealed a $1.36 billion plan to replace it with electricity generated from gas, wind, solar and other supply. In a blunt rebuff of Canberra’s request for the 45-year-old Hunter Valley plant to be either sold
Over the coming weeks weeks, MB will roll out a series of primer presentations on various key topics, which are aimed at getting newer readers up to speed, as well as providing an easy-to-digest reference point. Today’s presentation covers Australia’s future of energy – a key theme that has been thrashed-out on MB over recent
It appears my fears about Arrow development are playing out already, via the AFR: The prospects for developing Arrow’s Surat Basin coal seam gas reserves took a huge step forward on Friday with news of a 27-year contract by Arrow, owned by Shell and PetroChina, to sell gas to the QCLNG venture in Queensland. The
You don’t say: Energy giant ExxonMobil has not paid a cent in corporate income tax in Australia in at least two years, despite reaping more than $18 billion from the nation’s natural resources, according to three of the company’s workplace unions. Tax campaigners accuse the company of cashing in on Australia’s soaring gas prices, but avoiding paying tax on its
This is potentially good news: Shell has finally paved the way for a multi-billion dollar development of its large Arrow coal seam gas resource in Queensland, inking a 27-year deal for the sale of the gas to its majority-owned QCLNG venture. The deal, one of the largest gas supply contracts on the east coast, involves two separate Shell