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
The AFR ran some more interesting stuff over weekend, this time from former Credit Suisse analyst Mark Samter: “I think Bill Shorten should be held to account for his comments and to explain to the gas market, and to gas buyers because he has left it, I would argue deliberately opaque so that unions and
The AFR offers a useful debate about gas today, though is draws all the wrong conclusions as usual. Its editorial sets the tone under the title “Solution to energy crisis should fall back on the market”: Rather than heavy-handed resource intervention, the best response is to encourage more domestic supply. That means peeling back the
The scab grab in Aussie energy today is quite simply a bloody disgrace. The AFR leads off the farce: The nation’s energy companies and biggest electricity users have given up on politics and begun backroom talks about a self-regulated package of measures to reduce greenhouse gas emissions, restore energy reliability and improve investor stability. They
More warnings today from industry, via The Australian: The Australian Industry Group, which represents 60,000 manufacturing and industrial businesses, said the expected rise of gas prices on the east coast this summer back to near crisis levels threatens to dent the economy and reflects the government’s failure to sanction sound energy policies. Ai Group chief
There is a point at which recalcitrance becomes retardation and the ACCC has well and truly passed it on gas, via the AFR this morning: Competition czar Rod Sims singles out the two key culprits: overbuilding of LNG export capacity in Gladstone, and restrictions on onshore gas in NSW and Victoria that killed off new
The Australian energy crisis is the circus that just keeps on giving, via The Age: “It’s an inevitability that Australia will import gas, there needs to be at least one gas import terminal in Australia, if not potentially two,” Macquarie Bank analyst Andrew Hodge told Fairfax Media. …However, he said the terminals were unlikely to
Australia’s slow motion prognosticators are waking up to the new energy crisis. At the AFR is Jenifer Hewitt: Faced with the Turnbull government’s demands for change, the big market players promised to ensure adequate supply for domestic needs. At what price is far more complicated. …To help clarify matters, the ACCC is now publishing an
Via Reuters: A massive liquefied natural gas (LNG) export project in Canada has been given the final go-ahead by project partners, LNG Canada said on Tuesday, making it the first major new project for the fuel to win approval in recent years. First gas from the project is expected before 2025, aiming to feed an
And so it begins, or resumes, via Domainfax comes the catastrophic ACCC: Mr Sims said the information would allow manufacturers to get better gas contract prices. “Domestic gas buyers clearly should not have to pay more for gas produced in Australia than the overseas buyers. The publication of LNG ‘netback’ prices on our website will
Via the AFR: East coast manufacturers can expect little relief from high gas prices with the extension of a deal between the federal government and Queensland’s LNG exporters on local gas supply, as the tight global market for LNG puts renewed pressure on domestic prices. The agreement between the Queensland LNG exporters and the Prime
Is Australia entering a new energy shock? There are two reasons why it might be. First, US gas reserves are their lowest since 2003, via John Kemp: From Barrons: Natural gas prices could spike this winter if there is a severe cold snap. Gas stockpiles are expected to end the month of October at 3,330
Via Bloomie: The next LNG investment cycle may be primed for a liftoff. Royal Dutch Shell Plc and its partners are set to announce a final investment decision on their C$40 billion ($31 billion) liquefied natural gas terminal in western Canada as early as next week, Bloomberg reported Wednesday. This would be the first FID
Via Sinocism today: It sure feels like things may be starting to spiral out of control on many fronts… The China events I am following today include: Xi’s Heilongjiang tour continues, while the full propaganda rollout and the follow-on exhortations to study his comments have not yet begun; A key theme of the tour is
Via the AFR yesterday on Santos: The company is targeting a final go-ahead for the Barossa project by the end of 2019, while an investment decision on the PNG LNG expansion is also due around that time. Mr Gallagher also said Santos is on track to ramp up sales at the GLNG venture in Gladstone to
As I noted this morning, suddenly Australia is back in fashion in Beijing, via the AFR: Beijing has signalled it is willing to rebuild its relationship with Australia under the Morrison government, and says there is no conflict between the two nations in the South Pacific despite concerns about China’s growing influence in the region. The
Suddenly Australia is back in fashion, via the AFR: Beijing has signalled it is willing to rebuild its relationship with Australia under the Morrison government, and says there is no conflict between the two nations in the South Pacific despite concerns about China’s growing influence in the region. The upbeat assessment of Australia’s relationship with
Via the Herald Sun: UNLEADED petrol prices in Melbourne surged as high as 167.9c a litre on Monday, in the biggest hip-pocket hit at the bowser in a decade. About half of the metropolitan petrol stations monitored by the RACV had moved to the new high price by Monday afternoon. Leading fuel data source MotorMouth
After years of energy war from the Coalition that has included: backing emissions trading; trashing emissions trading; backing renewable energy targets; trashing renewable energy targets; backing direct action; trashing direct action; backing the Chief Scientist; trashing the Chief Scientist; backing a National Energy Guarantee; trashing a National Energy Guarantee. Today we get the new vision from
Via The Australian: In documents submitted to the Victorian government this week, AGL said it wanted the Crib Point import terminal, 65km southeast of Melbourne on the Mornington Peninsula, operating in the first half of 2020. “Victoria, and the other states – South Australia, New South Wales and Tasmania – that rely heavily on gas
Via Chanticleer today comes Michael Thawley weighing into the CK Group acquisition of APA, Australia’s gas pipeline monopoly: FIRB has no doubt received the same anonymous documents sent to Chanticleer pointing out the fact that one of Hong Kong’s power utilities, HKEI, is one-third owned by CK Group and one-fifth by State Grid. …”You might
Or so says The Australian: Energy producers on Australia’s east coast may escape the threat of government intervention after signalling the extension of a deal to offer uncontracted gas for domestic use before export, and agreeing to make gas available at peak demand periods for the power grid. Following meetings in Canberra yesterday, gas players
Origin (ORG) wants out of the gas cartel. And who could blame it? There’s a war brewing between the cartel and various Australian governments and it will not be good for shareholders. Via The Australian: Origin Energy is believed to be embarking on a strategic review of its upstream assets worth at least $8 billion
Via The Australian: Gas prices on Australia’s east coast are set to surge by up to 70 per cent over the next decade with the southern states forced to rely on LNG imports to get through peak demand in winter, consultancy Wood Mackenzie has warned. Prices for gas could surge to between $14.30 and $15.90
Gas market legend Mark Samter is again promoting LNG imports today, at the AFR: …The debate then hit a new low last week with Bill Shorten’s “plan” to introduce a permanent gas export control trigger that can be pulled when prices are too “high”, not just based off a shortfall like the flawed Australian Domestic
Via The Age: Victorian homeowners will be paid nearly $5000 towards the cost of household solar batteries by a re-elected Andrews government in the latest move aimed at making the state Australia’s leader in domestic-scale renewable energy. The latest promise of subsidies for small-scale renewable energy will see households who already have solar panels able
The AFR is upset about the death of the NEG: Labor will take the National Energy Guarantee or something similar to the next federal election as business and industry clamoured for certainty and new data showed power prices had jumped since the NEG was scrapped. It is understandable that markets would bid up electricity futures
As predictable as the sun, via The Australian: Queensland’s three big gas export plants are shipping at their strongest rates in seven months as global LNG prices rise to four-year highs and southern winter demand pushed Sydney and Melbourne gas prices to records last month. The spike may inform talks gas producers and LNG exporters
Via Gottiboff comes Andrew Liveras: Liveris accepts as a given that Australia wants to reduce its emissions and to honour its gas exports contracts. If it doesn’t honour those contracts it will do great long-term harm to the nation. …Liveris plan starts with the requirement that New South Wales needs to exploit its gas and
Catherine Tanna that is, at the AFR: Competition czar Rod Sims has dismantled EnergyAustralia’s reasoning that the introduction of a default retail electricity tariff will mean higher prices for most of its customers, saying that the competitive market means those customers will still be able to get discounts as big as they do now by
From The Australian comes AGL: Australia’s largest power generator, AGL Energy, has warned Victoria faces gas shortages in the early 2020s as supplies from Queensland dry up, with the problem to be made worse should Labor introduce a price trigger to limit export volumes and free up domestic supplies. …“As we move into the 2020s,
