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

10

The hideous truth about Narrabri gas

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

16

Empty Chair agrees to Morrison gas joke

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

16

Morrison’s gas unplan a joke of truly spectacular proportions

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

16

Morrison’s Keynesian gas pork abomination

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

9

Fool me once. Fool me twice. Gas cartel poisons east again

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

14

Aussie households slowly kill gas cartel with 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,

10

Santos takes a whiz on ACCC (and you)

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

26

WA blocks gas to the east

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

22

The gas cartel has bought Morrison lock, stock and barrel

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

11

ACCC: Time for fixed price gas reservation

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

4

Gotti wrong again on gas supply

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

3

More witedowns for worthless LNG white elephants

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

2

Energy minister demands electricity discounts from his cartel

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

9

Should NSW water be entrusted to liar Santos?

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

12

Smash Santos

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

5

Gas cartel gloats as it gouges

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.

3

Electricity prices slump briefly with gas

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

16

AFR: Only Nazis resist the gas cartel

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

12

LNG white elephants worthless

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

21

How best to beat the gas cartel

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

11

More gas cartel drivel

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,