Via the AFR: Labor states – or a future federal Labor government – that pursue more ambitious renewable energy targets than those set under the Turnbull government’s proposed new Reliability and Emissions Guarantee will face more costly reliability standards, which could increase the cost of electricity in their markets. Energy Security Board chairman Kerry Schott
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.
Via CBA: LNG is increasingly becoming an important commodity for Australia. We estimate oil and gas production — as measured by value added — will approach iron ore production in the next few years. The upshot is the LNG price is a growing influence on Australia’s terms of trade and AUD. The ongoing recovery in
I am going to do back-flip with a triple pike here. Do-nothing Malcolm has circumvented Tony Abbott on carbon: The Coalition party room has endorsed the government’s new energy plan, despite objections from Tony Abbott and others that the policy still has a component aimed at reducing emissions….Energy retailers will be required to meet standards
My head is exploding on this new energy stuff. The Greens are in uproar: Greens leader Richard Di Natale says the government has “effectively pulled out of the Paris Agreement” as he labelled Malcolm Turnbull “hollow” and “cowardly”. Senator Di Natale said the government would “argue against the laws of physics” by saying it could
And how the world turns. Do-nothing Malcolm has pulled a rabbit out of his hat or, rather, a lump of coal, with an ingenious new policy, via The Australian: Energy retailers will be forced to buy a minimum amount of baseload power from coal, gas or hydro for every megawatt of renewable energy under a
Depending on which paper you read, the ACCC has just condemned the entire National Electricity Market. If you read The Australian it’s all the fault of renewables: Malcolm Turnbull faces a crucial cabinet debate today with a new warning from voters against schemes that pass hidden power costs on to households, with almost 60 per
Via The Guardian: Statements by Tony Abbott suggesting that climate change is “probably doing good” are different to his opinion while he was prime minister and it is up to him to explain why he has changed his view, Julie Bishop has said. Speaking from South Korea on the ABC’s 7:30 on Thursday, the foreign affairs minister
There are many reasons why Australian power costs have risen over the past decade. But what has happened recently is decidedly uncomplicated. We’ve had a gas price shock owing to excessive exports. That has driven up the price of power because gas is the marginal price setter in the power market too. The chaos engulfing the energy
Bartho took up the cause of the LNG giants yesterday: Shell Australia’s new chair, Zoe Yujnovich, has injected what for some will be an uncomfortable dose of reality into what has been a generally misleading debate about the role that the three big Queensland export LNG plants have played in the east coast energy crisis.
Via Matthew Stevens today: The federal government might question Andy Vesey’s standing as a good corporate citizen, but a commercial nation facing further gas supply and price shocks from 2019 might well urge those working to craft a functioning energy policy to take stock of the savvy energy trader’s plans. Vesey’s thought crime, of course,
The gas cartel straight up lied to your face yesterday at the AFR: Santos’ head of strategy Angus Jaffray told the summit that were it not for the LNG projects in Queensland, the gas market on the east coast would be tighter rather than looser. Mr Jaffray said the domestic market couldn’t have supported the
Apparently not. It’s all the way with another crazy carbon election, via the AFR: Australia risks more energy policy paralysis and another election fought on climate change after the government signalled it was stepping away from a clean energy target, setting the scene for a new fight with Labor. Energy chiefs at The Australian Financial
Bill Shorten has also spoken on energy today at the AFR Summit: Mr Shorten said Labor would also introduce a national interest test for all new LNG facilities to “guard against a repeat of the current crisis”. He said Labor also supported the “responsible” development of onshore gas although fracking was largely a state issue.
Farewell CET: Energy Minister Josh Frydenberg has all but ruled out a clean energy target, saying the transition to lower greenhouse gas emissions cannot come at the expense of the reliability and affordability of our electricity system. Mr Frydenberg told the National Energy Summit in Sydney that emissions in the electricity sector had fallen over
Judith Sloan lost it on energy over the weekend: Move over, Ponzi; forget Bernie Madoff; ignore Enron; and dismiss collateralised debt obligations associated with subprime mortgages. Without a doubt, the biggest scam perpetrated against taxpayers and consumers is renewable energy. And if you think this scam is just an Australian phenomenon, think again. With very few
It’s taken five years but the great gas smash has finally begun. The media is full of frenzied options and commentary today on how to fix it. A magnificent stoush is underway between Do-nothing Malcolm and Alan Jones: Malcolm Turnbull and his government are headed for a showdown with highly influential broadcaster Alan Jones amid
Cross-posted from Australia Institute: Australia has plenty of cheap gas. The problem is private companies are selling it all overseas, writes principal adviser at The Australia Institute Mark Ogge. Hard to believe, isn’t it? But it’s true: in the last decade, tens of thousands of square kilometers of Queensland farmland has been covered in gas fields.
Via the AFR: While the federal government has threatened to use the GST formula to punish states that ban coal-seam gas, the body that administers the GST has already concluded the threat is not very scary. The Commonwealth Grants Commission considered the idea of using the GST to punish states for blocking coal seam gas
Via the AFR: …prices could be higher based on the spot Asian LNG price for the first quarter next year, translating to at least $11 a gigajoule for a large manufacturer in Victoria, and even more for a smaller one, said Mark Samter, energy analyst at Credit Suisse. The analysts are among energy market watchers that
From the AFR today: Even now that Canberra has backed away from triggering the export controls, Tuesday’s deal is seen having a similar effect as Queensland’s exports of gas will be essentially limited to long-term contracts. Gas and petroleum exploration and the production, treatment and marketing of natural gas, crude oil, condensate, naphtha and liquid
Australian gas customers are moving in for the kill: The recent renegotiation of the Gorgon contract between India’s Petronet LNG (PLL) and Mobil Australia Resource Company is bound to open more doors for similar deals, credit rating agency ICRA said. It said that akin to PLL, Gail is also is trying to renegotiate such contracts
Today from the AFR: International chemical industry investors have warned the gas supply deal does not address the soaring prices that are putting tens of thousands of jobs at risk and are calling for a national energy policy that would help open up onshore gas in Victoria and NSW. Senior executives at ChemChina, owner of
Via the ABC: In the end bloodshed was avoided. The Federal Government put its large calibre export control weapon back in the holster. The gas producers agreed to hand over sufficient supplies to cover a 54-petajoule shortfall regulators identified in the eastern state gas market next year and there were huge sighs of relief all
Via The New Daily: Australia’s gas producers are pushing the government to guarantee the purchase of gas in the domestic market, in a proposal that could cost taxpayers tens of millions of dollars. On Wednesday, Prime Minister Malcolm Turnbull revealed he had cut a deal with Australia’s three biggest gas producers – Origin, Santos and Shell – that would solve