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
Via the AFR comes another rubbish assessment of what is at stake in this week’s Narrabri gas approval. Let’s go through the claims one by one to get to the truth: The politics around the project are also heated at a state level. Under the $2 billion energy deal between the federal and NSW governments
Via Nick McKenna, CEO of APLNG and gas cartelier, at the AFR: As government and LNG producers renew discussions to extend the heads of agreement that assures domestic customers of access to gas, we must not let emotive calls for subsidised prices triumph over reason. It is well documented by both the Australian Competition and
Via The Fake Left: The draft reads: “Labor supports the responsible development of Australia’s gas reserves, subject to environmental approvals to ensure communities’ concerns are addressed through rigorous science-based processes, including gas from coal seams, shale and tight gas formations.” It says a future Labor government would ensure “gas development is environmentally sustainable, science-based and
I have absolutely no idea why manufacturing is on board with the new Morrison gas policy. All it wants is cheaper gas and power. Morrison will give it neither. Here it is: Gas will help re‑establish a strong economy as part of the Government’s JobMaker plan, making energy affordable for families and businesses and supporting
Via The Australian: MST Marquee analyst Mark Samter told clients Mr Liveris’ remarks deserved a gold medal for the most stupid comment ever made publicly, and had sparked an offer to the Australian businessman. “From what I can see he got paid ~$100m in just his last year alone as CEO of Dow. Now capital
Yesterday we saw the “gas-led recovery” plan”, via ABC: The potential for a taxpayer-backed, gas-fired power plant comes as the Federal Government turns its eye to the troubled gas market. The east coast gas market has boomed under the development of Queensland’s coal seam gas fields over the last decade. But while that has made
Prime Minister Scott Morrison has again pitched a gas-led recovery by bolstering gas supplies: The Prime Minister unveiled a plan on Tuesday to shore up Australia’s gas supply and slash power prices during a speech near Newcastle. A $52.9 million package will be included in the Federal Government’s October Budget to unlock supply at new
Why must it always be the worst possible option? Via the AFR: The federal government is considering a plan to secure gas from east coast producers and make it available at potentially lower prices for manufacturers to help lift the economy out of recession, according to industry sources. The proposal is said to be in
Via Michael West: Santos has lodged a big report based on false assumptions to push its Narrabri CSG project through regulators. Its independent expert is not independent, nor expert. Michael West investigates. They thought they could get away with it; that is, lobbing a chunky “independent expert’s report” at one minute to midnight in a bid to
Australian energy policy is a mess. Investors should ignore the arguments. The antagonists are stuck in a perpetual time shift, prosecuting cases from 5-10 years ago, ignorant of the incoming change in solar economics. 5 years ago coal and gas were the cheapest sources of energy in a majority of countries. Now wind and solar
The market will respond. With the Australian Government’s protected gas cartel driving power prices mad from 2015 guess what? At Bloomie: Australians’ fervent embrace of rooftop solar is forcing the grid to become more flexible. The shift has carved out daytime demand for traditional generation and caused bigger fluctuations in electricity use across the day,
Great work from Ian Verrender at the ABC: It’s always a good time for a bit of nation-building. And there’s no better time than when the chips are down. While argument rages as to how best to fight our way out of the worst economic downturn in more than a century, the corporate world last
Let’s recall what the ACCC recently had to say about the gas cartel this week: Australia’s east coast gas users are paying prices significantly above export parity prices, the ACCC’s latest gas report reveals. The ACCC’s Gas Inquiry 2017-2025 Interim Report, released today, shows that prices offered to domestic gas users in late 2019 and
Via ABC: A decision by the WA Government to ban onshore gas exports to the east has been labelled a “betrayal” of Australian states struggling with gas shortages by the state’s former premier, Colin Barnett. Premier Mark McGowan came under fire from industry groups this week after updating WA’s domestic gas policy to prevent onshore
Yesterday the competition regulator said: Recommendations to address price concerns The ACCC recommends the extension of the existing Commonwealth Government’s Heads of Agreement with LNG producers, due to expire at the end of 2020, because of the demonstrated capacity of LNG producers to supply additional gas into the domestic market when needed. “As well as
Via the ACCC today: Australia’s east coast gas users are paying prices significantly above export parity prices, the ACCC’s latest gas report reveals. The ACCC’s Gas Inquiry 2017-2025 Interim Report, released today, shows that prices offered to domestic gas users in late 2019 and early 2020 ranged from $8 to $11/GJ. While this was down
Though at least he covers it. Via Gottiboff: The dam wall holding commercial gas prices at ridiculous levels is starting to crack …The crack in wall was actually opened by ACCC chief Rod Sims late in 2017 when he approved a buying group, Eastern Energy Buyers Group, to aggregate orders from medium sized businesses up
Via AFR: Australia’s embattled liquefied natural gas industry is the subject of further write-downs as French energy major Total SA advised of $US800 million ($1.1 billion) of impairments in Australia out of a total $US8 billion across its global business. Total, which owns material stakes in both Inpex Corporation’s $US45 billion Ichthys LNG project in
The Pakistani failed state is showing Aussie gas consumers the way forward: Pakistan LNG Limited said Tuesday it has secured a record low price for a spot liquefied natural gas (LNG) cargo from Azerbaijan’s SOCAR, Kallanish Energy reports. According to a final tender evaluation report, dated July 28, SOCAR has offered the lowest bid at
Corruption and cowardice mark this government. Via the AFR: Federal Energy Minister Angus Taylor has warned big energy companies to pass on large falls in wholesale electricity prices to their customers or face potential action from the competition regulator. While some big retailers, such as AGL Energy and Origin, have offered retail prices of about
Via the AFR: Lawyers and scientists who warned NSW’s Independent Planning Commission that Santos’ $3.6 billion Narrabri gas project could irreversibly harm water resources are taking encouragement from the IPC’s move to test those claims with experts at the NSW planning department. Counsel Robert White at the Environmental Defenders Office said the unusual move by
One of Australia’s most evil companies, Santos, is taking a pounding at the NSW Independent Planning Commission’s Narrabri project review. Via the AFR: Robert White, a lawyer from the NSW Environmental Defenders Office, warned the evidence of the experts showed the project represented a “risk of serious harm” and argued they must use the “precautionary
The gas cartelier can’t help itself: In short, STO offset international weakness with domestic gouging. Hoocoodanode! We should give it back a fixed-price domestic contract based around $5Gj for domestic reservation. It charged about $8Gj in Q2 even as the volumes it supplied both here and overseas cratered.
Don’t hold your breath. At the AFR: Wholesale electricity prices traded at the lowest in five years as the coronavirus lockdown crimped energy demand, especially from businesses in NSW and Queensland. The latest quarterly report from the Australian Energy Market Operator confirmed the downward trend in prices over the past 18 months. Average spot wholesale
Via the AFR: Santos’s proposed Narrabri gas project would turn the rich plains of the north-west NSW farming region into a “toxic dump”, Warrumbungle Shire Councillor Kodi Brady told the state’s Independent Planning Commission on Tuesday. It was the second of seven scheduled hearing days on Santos’ planning application for the $3.6 billion coal seam
Another writedown of the value of Australia’s worthless LNG export refrigerators today: More writedowns to come with those long-range forecasts still too high for oil and, as we go forward, crashed spot prices will overtake Brent benchmarks in Asia as well. By my calculations, that’s now roughly $4bn in writedowns for a $6bn investment, in
Via the AFR: Santos, the Australian Workers’ Union and the Narrabri local council have rejected a wall of environmental, farmer and activist opposition to a $3.6 billion gas project that promises to meet up to half NSW’s gas demand and help keep a lid on prices for manufacturers and households. Claims by the anti-coal-seam gas
It the post-truth world run by oligarchs, corporations can lie with impunity. There is no better example than gas cartelier Santos which has made fine art form of it. Previously from The Australian: As Santos worked toward approving its company-transforming Gladstone LNG project at the start of this decade, managing director David Knox made the
It’s maddening. At Domain: One in three tankers loaded with cargoes of Australian liquefied natural gas last month is either anchored at sea or taking a longer-than-usual journey to its destination as coronavirus prompts more buyers to delay deliveries. …In the latest sign of the increasing pain in the sector, new figures reveal the number
From cartel champion, The Australian: A gas deal between US energy major ConocoPhillips and junior explorer 3D Oil in Victoria’s offshore Otway Basin could help ease a forecast supply crunch set to hit the east coast by 2024. After selling an 80 per cent stake in the T49P permit in the Otway Basin to Conoco,
