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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The persecution of AGL is pure sovereign risk

Via the AFR: AGL Energy’s proposal to import LNG into Victoria is understood to be driving a push to force a restructuring of the utility or impose conditions around the plant’s operations amid worries it will only cement the company’s strong market position in the state suffering most from high gas prices. The debate around

14

East coast gas farce doubles

Yes, somehow the farce has doubled in just a few days. Last week it was Twiggy Forrest importing gas to NSW. Now it’s AGL to Victoria: AGL Energy has struck several deals for its proposed liquefied natural gas import jetty at Crib Point in Victoria, which could help deliver more gas to Victoria and South

18

Twiggy Forrest’s east coast gas play will dramatically raise prices

Andrew Forrest’s new east coast gas play is just another disastrous chapter in Australia’s gas monstrosity. Via AFR today: AIE is the sponsor of not one of but three separate plans to import LNG for sale into domestic gas markets. Forrest has involved himself though his privately owned energy play, Squadron Energy. He was introduced

3

Shall we give LNG import rights to the export cartel?

More absolute garbage today on gas, via The Australian: Oil and gas giants Royal Dutch Shell and ExxonMobil have been urged to consider the development of liquefied natural gas import terminals on Australia’s east coast as the race to build the first of the facilities intensifies. Saul Kavonic, the principal Australasia analyst for international consultancy

10

Coaliton wedges self as energy loons take over asylum

It’s all bodice ripping, hair pulling and hysteria now, at The Australian: Craig Kelly, backed by Tony Abbott, called for the competition watchdog to be given new powers that would make it “crystal clear” that closing down a essential service utility when there were “other options”, such as selling to another player, was anti-competitive behaviour.

10

Block the Santos takeover or commit suicide by gas

Via The Australian: Leading gas market analysts Wood Mackenzie and EnergyQuest are tipping east coast gas prices to rise above $10 a gigajoule, despite federal government and gas industry moves to divert more supplies to domestic markets. …Wood Mackenzie said east coast prices were forecast to head to between $10 and $13 a gigajoule. …Mr

14

One Nation makes perfect sense on gas market reform

Via the AFR: Industrial gas users representing more than 10 per cent of east coast domestic demand are at risk of closure because of high gas prices, with upward pressure on tariffs only set to worsen, according to leading industry consultancy Wood Mackenzie. Senior analyst Saul Kavonic said the most at risk are about seven

7

And now for an oil bubble?

Oil is off the hook post-Iran deal: Is the price run legitimate? Life without the Iran deal isn’t whole lot different given everyone except the US remains on board. Via the FT: The EU is committed to salvaging the 2015 deal intended to curb Iran’s nuclear ambitions and Tehran has said it would stick to

2

Orica celebrates easing gas gouge

Via The Australian: The corporate watchdog’s latest efforts to improve transparency in the east coast gas market should help gas users secure better deals, according to Orica chief executive Alberto Calderon. “We’ve been supportive of the plans of the government to put the (gas) market in control, and lately the ACCC and the initiative of

4

Greens propose eminently sensible gas royalty

Via Domainfax: Oil and gas multinationals would pay an extra $4.2 billion in tax over four years under a royalty policy costed by the Parliamentary Budget Office, as resource giants prepare to be hit by new taxes in Tuesday’s budget. The independent assessment of the policy submitted by the Greeens shows a 10 per cent

3

Gas cartel prints money

Gas cartelier, Origin Energy released results yesterday, via the AFR: For the first nine months of 2017-18, sales from APLNG were up 48 per cent at $1.48 billion. Maintenance work carried out in March on the second LNG train at the $25 billion APLNG project in Gladstone meant more gas was sold into the domestic