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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Nothing Energy Guarantee unravels

Yes, he’s done it again, at the AFR is Ben Potter: Is the National Energy Guarantee really the best chance we have of – at long last – ending 15 years of incompetence and political infighting in energy and climate policy making? Or is the NEG a face-saving fig leaf to cover for the Turnbull

17

Great news: Korea declares war on Woodside

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

3

The greatest gas shock is yet to come

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

34

SA battery already undermining gas cartel

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

4

Cartel Canavan pumps hot gas

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

10

Pensioner killer turns knife inwards

What a firm! Via the AFR: Origin Energy will cut more than a third of the circa 1600 jobs in its integrated gas business in a dramatic step-up in its efforts to slash costs and protect against swings in commodity prices. Some 650 jobs will go this year, including 500 by April, according to an

25

Renewables go boom!

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

3

The oil shock builds

Oil is dragging its anchor as the USD crashes: One does not have to look far to find who is buying: The massive speculative long is a punt that inventory draw down will accelerate and that US shale will not overdo it this time, via WSJ: U.S. shale companies are poised to earn real money

30

Canavan reassures Asian households of cheap gas

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

3

Gottiboff misleads on gas crisis

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

20

Energy shock bleeds business dry

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

11

AGL, NAB: Coal dead

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

3

Manufacturing lobby embraces suicidal gas benchmark

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

4

ACCC: Gas cartel still gougin’ (and it’ll get worse)

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

18

AGL plans endless energy shock

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

7

MB primer: The future of energy

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

13

Gas cartel gives tax-payers a fearful rogering

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

5

Shell to develop Arrow

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