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

8

AGL takes Australia into the LNG doom loop

Via the AFR: AGL Energy has shrugged off scepticism about its $250 million plan to import gas into Victoria, kicking off an official process to invite LNG players to supply the project. A formal request for proposals from a group of pre-qualified LNG suppliers was issued on Friday as AGL took a decisive step to follow

7

SA seeks block on Santos bid

Quite rightly: US player Harbour Energy’s ambitions for an $11 billion takeover of Santos have run immediately into political hot water, as South Australian Treasurer Tom Koutsantonis signalled the state would seek to prevent the oil and gas producer falling into foreign hands. “The state government would be very concerned by any foreign takeover of Santos,”

7

Block the Santos takeover

Via the AFR: Big American oil is preparing to make a $11 billion all-cash takeover offer for Santos as the next step in play for regional and global relevance in rapidly reforming liquid natural gas markets. A consortium of powerful global energy investors, led by a former executive director of Royal Dutch Shell, Linda Cook,

5

Australia’s Asian gas giveaway booms!

Via The Australian: Queensland is exporting gas at record rates as resurgent oil prices boost LNG contract revenue and a Chinese push to reduce coal-fired power and heating pushes LNG spot prices and medium-term demand forecasts higher. China’s campaign to clean its air, particularly around Beijing, has already had a big impact on the prices

9

Gas crisis returns

Hoocoodanode, via the AFR: Industrial energy buyers on the east coast are seeing a fresh deterioration in the choice and terms of gas supply offers, only weeks after the federal government’s deal with Queensland LNG exporters for additional local supplies. Businesses seeking firm gas supply contracts are often finding only one retailer with gas available

4

What will the Saudi purge do to oil?

Via the FT: Oil traders have a new political risk factor to absorb from Saudi Arabia with the move by the powerful Crown Prince Mohammed bin Salman to detain some of the kingdom’s most prominent business people, officials and princes. Saudi Arabia is the world’s second-largest crude producer, the biggest crude exporter and has the

24

Gupta: Straya has highest energy cost in the world

Nobody cares but: GFG Alliance chairman Sanjeev Gupta says Australia has the highest power costs in the world when its high wholesale prices are combined with its huge volatility. But the British billionaire industrialist, who has moved to Australia after buying the stricken Arrium business, including the Whyalla steel plant this year, has not called

35

Elon Musk brought to tears by Aussie power prices

From the Daily Heil: Billionaire energy mogul Elon Musk was almost brought to tears by Australia’s deepening electricity crisis that has prices soaring out of control. The Tesla boss was confronted with figures showing record numbers of people were disconnected because they couldn’t pay their bills. ‘Wow, really?’ he said in disbelief when told by 60 Minutes

4

APLNG commits to greater gas price gouging

The LNGers get such an easy run considering the economic black hole they have unleashed. Via Domainfax: Gas producer and exporter Australia Pacific LNG has promised to significantly boost the supply of natural gas to the domestic east coast market, after striking a sales agreement with major shareholder Origin Energy. APLNG, a joint venture between

1

Can China save Aussie LNG?

Via SCMP: This winter, more homes in China will be heated up by natural gas as Beijing would have liked amid its push for local governments in northern China to use cleaner burning gas. The irony however, is there may not be enough supply to go around. Industry executives and analysts are already warning of

7

NEG does not end the climate wars

Via the AFR: The key Labor states of Victoria and South Australia have left the door open to the National Energy Guarantee while maintaining their rage against the Turnbull government for shifting the policy behind their backs. …Grattan Institute energy program director Tony Wood said Labor will seek concessions for its support so as not to be

3

EIA thanks dog the US’s gas market is not Australia’s

Via the US Energy Information Agency: Source: Australia Energy Market Operator Gas Bulletin Board, IHS Australia became the world’s second-largest exporter of liquefied natural gas (LNG) in 2015 and is likely to overtake Qatar as the world’s largest LNG exporter by 2019. As Australia’s LNG exports have increased, primarily from LNG projects in eastern Australia, the

9

LNG jokers burn $4.5bn for fun

Via The Australian comes the marvel of Australia’s LNG boom: The huge impact of the OPEC oil cartel’s battle with US shale producers has been starkly revealed in a national industry survey that says Australia’s oil and gas industry logged a combined 2015-16 underlying net loss (excluding writedowns) of $4.5 billion. The results of the

25

Labor should back Tunbull’s energy plan

Via the AFR: Labor states – or a future federal Labor government – that pursue more ambitious renewable energy targets than those set under the Turnbull government’s proposed new Reliability and Emissions Guarantee will face more costly reliability standards, which could increase the cost of electricity in their markets. Energy Security Board chairman Kerry Schott

35

Has Do-nothing Malcolm “ended the climate wars”?

I am going to do back-flip with a triple pike here. Do-nothing Malcolm has circumvented Tony Abbott on carbon: The Coalition party room has endorsed the government’s new energy plan, despite objections from Tony Abbott and others that the policy still has a component aimed at reducing emissions….Energy retailers will be required to meet standards

27

Coal Energy Target is some serious skullduggery

My head is exploding on this new energy stuff. The Greens are in uproar: Greens leader Richard Di Natale says the government has “effectively pulled out of the Paris Agreement” as he labelled Malcolm Turnbull “hollow” and “cowardly”. Senator Di Natale said the government would “argue against the laws of physics” by saying it could

9

Climate flip-flopping Coalition condemns Abbott climate flip-flopping

Via The Guardian: Statements by Tony Abbott suggesting that climate change is “probably doing good” are different to his opinion while he was prime minister and it is up to him to explain why he has changed his view, Julie Bishop has said. Speaking from South Korea on the ABC’s 7:30 on Thursday, the foreign affairs minister

21

Why importing LNG is another disastrous idea

Via Matthew Stevens today: The federal government might question Andy Vesey’s standing as a good corporate citizen, but a commercial nation facing further gas supply and price shocks from 2019 might well urge those working to craft a functioning energy policy to take stock of the savvy energy trader’s plans. Vesey’s thought crime, of course,