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
Here we go, via AFR: Australian smelters are struggling under high power costs and weak aluminium prices, and their reliance on fossil fuels is also becoming a competitive disadvantage, with Alcoa signalling that reducing its carbon footprint was an important goal of the “review” under way into almost half its global smelting fleet. …Federal Education
Via Wood Mackenzie: International gas and LNG prices have collapsed. For most of 2019, the global market has seen improving gas supply and intense supplier competition result in lower prices. In August 2019, Asian spot LNG prices went below U.S.$4 per million British thermal unit (mmBtu) (A$5.70 per gigajoule (GJ)), two and a half times
And so it goes. via NT News: THE operators of Darwin’s first gas plant, ConocoPhillips have sold the LNG plant and its North Australia assets for more than $2 billion. Oil and gas producer Santos says it will pay $2.04 billion for ConocoPhillips’s operating interests in Darwin LNG, Bayu-Undan, Barossa and Poseidon gas assets. …Santos
Via RBC: We dug deep into the numbers (and mapping) to better assess fundamentals and financial impact Investors are increasingly concerned about what a frac ban would mean for the oil & gas industry in the US and if this is even possible. Our rigorous approach analyzed the subject through discussions with industry
Via John Kemp comes weekly charts of hedge fund oil positioning which is definitely getting short: But has scope to get materially shorter yet: I still fear a Q4 price crash for oil as falling seasonal demand and wider global growth weakening combine to deliver another period of glut: It is my key trigger for
You can’t make this stuff up. Via the AFR: Competition regulator Rod Sims has suggested big electricity companies are deliberately delaying investment in new fast-start gas power stations to defend their own profits, deepening the quarrel between government and the energy industry. In comments that were bluntly rejected by power producers but back the position
Via Domain: Australia would fail to meet its Paris Agreement commitments to cut greenhouse gas emissions even with a $US75 carbon tax that would drive up Australia’s electricity prices by 75 per cent over the next decade. Research by the International Monetary Fund, released on Friday, shows Australia is still so dependent on coal and
Loving the work of Incitec CEO Jeanne Johns who sticks it to mining regularly: “For the quiet Australians working in highly skilled manufacturing jobs in places like Mt Isa, Townsville, Moranbah and other urban centres, the time for them to act is now,” she said. …She said the first step was ”the need for a
Cross-posted from One Step off the Grid: The calendar says winter is over. Warmer days lie ahead. But this past winter was one when Australians in all-electric homes could be comfortable and count the dollars saved while burning no fossil gas. Home-economic studies show Australians can save money with all-electric homes by tapping in to renewable
Via the EIA last night: Brent crude oil spot prices averaged $63 per barrel (b) in September, up $4/b from August and down $16/b from the September 2018 average. Brent spot prices began September at $61/b and increased to $68/b after attacks on major Saudi Arabian oil infrastructure disrupted the country’s crude oil production. However, Brent spot
Via the AFR today: The chair of the Energy Security Board Dr Kerry Schott says the rapid take-up of household rooftop solar panels in Australian cities is causing energy security problems for energy distribution companies. …”The so-called duck curve is really causing security issues for the distribution networks,” she said.Dr Schott said Australia’s power grid
Bloomberg just published another stark reminder of the shifting landscape for energy generation – fossil fuels have a limited time as viable sources of energy. And I’m not talking about saving the planet or carbon taxes, simply economics. Coal, gas, oil, all have economics based on a scarcity curve: the more we use, the deeper
Oh yes, the absurdity cometh. Via NGI: Tokyo Gas, Japan’s largest natural gas utility, is joining like-minded gas importers and plans to renegotiate long-term liquefied natural gas (LNG) contracts to remove restrictive destination clauses and increase flexibility. “For most new term contracts, we basically try to win deals that come destination-free,” Tokyo Gas President Takashi
Via AFR: Federal Resources Minister Matthew Canavan is under pressure to consider a blanket cap on LNG exports from Queensland as activist groups, including The Australia Institute, argue the existing LNG export control policy is only entrenching high prices for east coast gas users. “Placing a cap on LNG exports would ensure that gas saved
Clinton Fernandes at Michael West: Norway delivered its oil & gas riches to its people, Australia delivered the profits into foreign hands, having done the exploration, spending years and billions proving up giant gas fields. As the gas cartel rakes in the profits exporting LNG at the expense of local consumers Clinton Fernandes presents a timely reminder
I’ve given him a mighty serve on a foreign labour arbitrage business model and mass immigration hypocrisy but Mike Cannon-Brookes has some kick-arse ideas, via AFR: Atlassian co-founder Mike Cannon-Brookes will invest part of his personal wealth in an audacious $25 billion project to create the world’s biggest solar farm, its biggest power storage system,
David Llewellyn-smith spoke with 2GB’s Luke Grant this morning, where he demolished the stupidity around plans for Australia – the Saudi Arabia of gas – to import LNG to solve looming ‘gas shortages’: EnergyAustralia, Australia’s third-largest energy retailer, agreed on Wednesday to buy gas from a liquefied natural gas (LNG) import terminal planned by a
Via WSJ: The Saudi Arabian Oil Co. is in emergency talks with equipment makers and service providers, offering to pay premium rates for parts and repair work as it attempts a speedy recovery from missile attacks on its largest oil-processing facilities, Saudi officials and oil contractors said. It may take many months—rather than the maximum
Recall this: EnergyAustralia, Australia’s third-largest energy retailer, on Wednesday agreed to buy gas from a liquefied natural gas (LNG)import terminal planned by a Japanese-backed joint venture, in the first of several deals needed for the project to go ahead. The Port Kembla LNG terminal is one of five proposed LNG import terminals that could help
Some welcome news for LNG producers as the spike in the oil price flows through to the gas price for many Australian producers due to contracts struck over a decade ago. However, it is a short term gain only, the LNG market is highly competitive and only going to get more competitive going forward –
Via The Australian comes mafiosi number one, Origin Energy: “The ADGSM or any similar mechanism is an extreme form of intervention that should only be temporary,” Origin said in its submission to the government review. The ADGSM could lead to “an increased likelihood for moral hazard to the extent prospective buyers choose not to enter
As we know, the global economy is on the edge of an oil shock as Saudi Arabia reels from Houthi rebel attacks. How will this impact the Australian economy and assets? The largest single impact will be on Aussie households. Petrol prices are the largest average monthly spend already, via CommSec: The mid-range shock scenario
DXY was own Friday night as EUR and CNY rebounded: The Australian dollar was mixed against DMs: And EMs: Gold fell: Oil fell: Metals bounced: Miners are in heaven for no known reason: EM stocks pushed higher: Junk too: Treasuries were smashed: Bunds too: And Aussie bonds: Stocks were firm: Westpac has the wrap: Event
Via EIA this time: In the September 2019 update of its Short-Term Energy Outlook (STEO), the U.S. Energy Information Administration (EIA) revised its forecast for 2019 global liquid fuels consumption down to 100.8 million barrels per day (b/d), 0.1 million b/d lower than the August STEO and 0.7 million b/d lower than the January STEO. EIA attributes
Via Matthew Warren, former chief executive of the Australian Energy Council, the Energy Supply Association of Australia and the Clean Energy Council, at the AFR: Wholesale spot electricity prices are now regularly trampolining in Queensland, NSW and Victoria, with prices hitting zero or entering negative territory, and then rocketing back up once the sun has
For those that don’t know already know about the single greatest commodity policy stuff up since Nauru hosed away its guano billions, here it is!
I noted last week that the Planet Earth gas price has collapsed. This week I can confirm that the Planet Earth gas price has fallen to all new lows. Meanwhile, through the worm hole, on the far flung asteroid called Australia, gas prices remain at historic highs. The drivers of the global collapse are manifold.
Via the Petroleum Economist: Iran’s foreign minister Mohammad Zarif paid a visit to his Chinese counterpart Wang Li at the end of August to present a road map for the China-Iran comprehensive strategic partnership, signed in 2016. The updated agreement echoes many of the points contained in previous China-Iran accords, and already in the public
The US price is currently $3.50mmBtu. The Asian gas price is $7.40mmBtu. The European gas price is around $4.50mmBtu. In Australia, which has more dirt cheap gas per capita than any of them, the current gas price is $11mmBtu. Now, I don’t want to upset anyone (well, yes, I do, everyone actually) but we are
Via Reuters: Japan imported its first cargo of liquefied natural gas (LNG) from China in July as utilities from the world’s biggest buyer of the fuel seek out new suppliers and try to lower costs amid tough competition at home. The shipment illustrates the increasing flexibility of the Asian LNG market. China has become the
