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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Santos lies again

Last week I noted the campaign to get Santos’ Narrabri gas project off the ground owing to its importance as a foil for the Centre Alliance push for gas reservation and, by extension, the ScoMo’s Government’s tax cuts. The AFR declared the project all but approved: Encouraging indications that the Narrabri gas project will go

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Gas cartel is the sovereign risk, not Australia

Via The Australian: Australian energy producers have slammed a move by the Coalition to consider domestic gas reservation, arguing the interventionist measure wouldn’t lower prices for local users but would significantly increase the nation’s sovereign risk profile. …Cooper Energy, which is building the Sole gas project off the Victorian coast, said a reservation policy would

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Centre Alliance patriots hammer gas cartel

Bravo Centre Alliance, via the AFR: The Coalition is risking a brawl with the gas industry by actively considering a domestic gas reserve on the east coast for new projects as part of its push to get income tax cuts through parliament. The proposal, similar to a gas quota policy conceived by Labor three years

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How to fight AGL’s evil empire

Here is the problem, via The Australian: AGL Energy says big gas users on the east coast face years of elevated prices, with the high cost of moving Queensland gas to southern states, expensive LNG imports and developing new domestic supplies locking in high tariffs for industrial buyers. Australia’s biggest electricity generator — working to

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Centre Alliance drive for gas reservation lives

Via The Saturday Paper: The federal government is considering further measures to ease the financial burden on pensioners and new moves to force domestic gas prices down, in a deal to secure enough senate support to legislate its proposed tax cuts in their entirety. South Australian senator Rex Patrick and his Centre Alliance colleague Stirling

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Poisonous gas propaganda engulfs press

Via The Australian: The father of Queensland’s $80 billion liquefied natural gas industry has warned that business and investment confidence could be destroyed by the state government’s deeply contested royalty hike killing “the goose that laid the golden egg”. Coal-seam gas pioneer Richard Cottee spoke out as industry body the Australian Petroleum Production and Exploration

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Adani to loose QLD coal tsunami?

Via the ABC: A decision on the Adani groundwater management plan is set down for tomorrow with environmentalists saying if the Queensland Government gives the green light it will set a precedent for six other mines also planned for the region and allow Adani to break ground within weeks. The Queensland Resources Council (QRC) said

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Gas robber barons howl as QLD hikes royalties

Banana Republic 101. Two former resources ministers from opposite sides of the aisle squealing simultaneously at new gas royalties. One at The Australian: Former federal resources minister Martin Ferguson warned last night that the Queensland government’s surprise 25 per cent hike of gas production royalties in the state budget would jeopardise investment in mining and

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The oil canary is dead in the cage

Last night the EIA cut its oil demand outlook: The US Energy Information Administration on Tuesday cut its outlook for 2019 oil prices by $3.50/b for WTI and $2.95/b for Brent in response to rising uncertainty about global oil demand growth. Register Now EIA now expects Brent to average $66.69/b in 2019, down from $69.64/b

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Gas disaster mushrooms into MSM

Yet it remains painfully limited and wrong. Leading us off, last week the Asian gas price collapsed again amid the ceaseless glut, now down to USD4.20Gj or AUD6Gj. According to the Australian Domestic Gas Security Mechanism (ADGSM) we should now have a local gas price near $4Gj, back within historical ranges. Yet the spot market

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Hyenas rip at the carcass of Australian energy

The Australian energy carcass is being torn apart by hyenas today. Leading off are the dying manufacturers: Australia’s big energy users will hold urgent talks with the federal government requesting emergency gas market measures to ensure heavy industry can stay afloat amid opposition from top producers to government intervention in the sector. The country’s largest

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Aussie LNG circus goes completely mad

It’s mad, via the AFR: Jee Yoon, founder and managing director of South Korea’s Energy Projects and Infrastructure Korea (EPIK), said he was fielding interest from LNG traders keen to use the Newcastle GasDock and was still targeting a final investment decision on the $US430 million ($620 million) project in early 2020. …Unlike the Port

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As economy sinks, energy cartel steals $20bn in broad daylight

Both fiscal and monetary authorities are in a building panic about Aussie growth. They should be. We’ve been in per capita recession for nine months and it’s getting worse not better. So, as the mad scramble for tax, monetary and prudential stimulus intensifies, why is the Government overlooking energy prices? Treasurer Frydenberg told business where

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Australian LNG is a one trillion dollar heist

The Asian gas spot price has now cratered to $6.90Gj. Based on the current Australian Domestic Gas Security Mechanism (ADGSM) that should have the domestic price at roughly $5Gj. The east coast gas crisis should be over. Instead the spot price is at $9.50Gj while the Government and ACCC do NOTHING to enforce their own agreement

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Liveras: Gas disaster upon Australia

Via The Australian comes a lonely Andrew Liveras: “It is a tragedy that manufacturing in Australia is being hit by high electricity prices when we have abundant energy. It is a situation which should be remedied as fast as possible.” Mr Liveris cited the potential of the Northern Territory’s Beetaloo Basin, some 500km southeast of

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Defence orders marshmellows as gas disaster locks in

Via Matthew Stevens: The fate of Incitec Pivot’s gas-challenged Gibson Island urea plant near Brisbane looms as an early challenge for whomever our returning prime minister, Scott Morrison, gifts with the resources portfolio. …She called out that efforts to secure new gas supplies at a price low enough to re-secure the economics of the company’s

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Manufacturing should leave Australia

I’ve tried my hardest but have failed and the result us upon us, at the AFR: A gas price cut is required for Queensland’s Gibson Island fertiliser plant to avoid closure this year, with owner Incitec Pivot urging the re-elected Morrison Government to ensure gas was ”available and affordable” for Australian manufacturers. Uncertainty over the