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
Via EnergyQuest at the AFR: One third of Queensland’s new $84 billion LNG export industry is likely to be forced to close down by 2025 due to shortages of coal seam gas reserves and the need for shipments to be diverted to local users, according to a detailed analysis of the sector. The findings by
Australians are paying more for their gas than the Japanese again. Asian spot prices are today at approximately $9Gj. On the east coast of Australia they are approximately $10Gj. Under the terms of the Australian Domestic Gas Security Mechanism (ADGSM) the local export net-back and spot price should now be $7Gj. Though we should also
Via the AFR: The weaker LNG export market has “taken the top off” domestic gas prices in the eastern states but industrial buyers are still jostling for supplies available within the new normal range of $9-$11 a gigajoule, well above historical levels, according to one of the few producers with gas to sell next financial
If gall could be converted into energy that is. Via the AFR: EnergyAustralia managing director Catherine Tanna has unleashed on the “big stick” bill that introduces measures to force the divestment of energy assets, bluntly telling a Senate committee it is a “desperate and dangerous” measure by the Morrison government to “look tough” ahead of
Via CNBC: Exxon Mobil and Qatar Petroleum on Tuesday announced a final decision to finance a $10 billion-plus project to export liquefied natural gas from the Texas Gulf Coast. The decision moves forward the latest export terminal fueling growing shipments of U.S. LNG, or natural gas cooled to liquid form, for overseas travel. The Department
Thank goodness, via the AFR: Credit Suisse energy analyst Saul Kavonic said that despite the crowd of proposals, none may get a green light this year. “I remain sceptical of an LNG import terminal achieving FID [final investment decision] this year due to poor appetite by industrial buyers, social licence challenges, and the risk posed
Via Reuters: Spot prices for March delivery to Asia LNG-AS this week fell to $7.00 per million British thermal units (mmBtu), down $1 from the previous week, lowest since April 6, trade sources said. They are also seasonally at the lowest for this time of the year since 2016, Reuters data showed. This translates to
With Judith Sloan making perfect sense and no sense at all: By the time I was driving home, a series of rolling brownouts (a cute term for electricity being cut off in whole suburbs) was under way. The chief executive of the Australian Energy Market Operator, Audrey Zibelman, was cheerfully informing us that cutting back
By Leith van Onselen Domestic gas prices rose sharply in Melbourne, Sydney, Brisbane and Adelaide in December, while large industrial gas users still struggle to secure affordable deals with energy producers. Traditional sources of domestic gas supply such as Bass Strait are on the decline, while a lot of the gas from newer sources is
Via the AFR: Gas producers are privately voicing reservations about proposals that would require them to report on sales contracts, reserves and export prices, worried that the measures intended to increase transparency in the under-pressure east coast market could put them at a commercial disadvantage. The recommendations, released by the national competition regulator and the
Yes, it’s gas cartel gouge time once again. After the treasonous ACCC did nothing again yesterday on the gas market, the cartel is making hay charging Aussies $11Gj spot prices across the eastern seaboard while Asian prices are in the $9Gjs. Meanwhile, according to the disastrous ACCC, contract prices are: …offered and agreed in mid-2018
The ACCC was out with its gas market update yesterday and not once, not once in a 120 page document, did it mention the word “reservation”. Despite this hilarious chart: 71% of east coast demand is the gas export cartel. If we held just 10% of that back then all our energy problems would be
From QLD Resources today: Queensland has given the green light to a new Surat Basin based project which will see more gas made available for the domestic market. “Last month I announced that a joint venture between Santos and Shell had won the right to explore for gas in Surat Basin – gas which will
Yes, it’s back. The east coast gas cartel is once again charging Australians more for their own gas than the Japanese, Chinese, Koreans or anybody else that happens along. Via the FT: Liquefied natural gas prices in Asia have hit a six-month low as warmer than normal winter weather and forward buying by Chinese importers
Via Domain: ExxonMobil has made a final investment decision on its Bass Strait gas project, which will bring more gas to Victoria in the next five years. The decision backing the West Barracouta field, located off Victoria’s shores, boosts ExxonMobil’s Gippsland Basin output. Exxon did not disclose the volumes but this gas is not for
Via the US Studies Centre: Australia and the United States have much in common: liberal, democratic institutions; technologically advanced, largely open economies; growing populations; demanding infrastructure; and above all, abundant energy resources. But with respect to energy, Australia and the United States are on radically different paths. Australia faces an energy crisis, stressing households and
Via The Australian: Manufacturers and heavy industry may be forced to shift operations overseas or shut down as energy prices soar three times higher than in the US, sparking fears of a fresh crisis for big users, analysis backed by Dow Chemical has warned. Queensland, the home of three LNG export plants, pays more for
Via the AFR comes Australia’s BCA head and chief energy wrecker, Grant King: “In the last four terms of parliament, two under Labor and two under Coalition governments, we have lurched from one extreme to the other in terms of policy outcomes,” Mr King said on Monday night. “The most recent idea from government has been
Via the AFR: Energy producers and investors are regarding a possible Labor government after next year’s general election as offering the prospect of a defined energy policy that, while potentially tougher for the industry in some areas, will at least bring an end to what some have described as “almost uninvestable” situation under the Morrison
EIA put out a timely reminder of the big picture for US oil. There has never been more proved reserves or production: A big part of this is the economics of shale oil. A typical oil well has economics that looks something like this: Source: Changing Paradigm for the Oil Industry: From Peak Oil Production
How? How did they do it? From the EIA: EIA expects total U.S. coal consumption in 2018 to fall to 691 million short tons (MMst), a 4% decline from 2017 and the lowest level since 1979. U.S. coal consumption has been falling since its peak in 2007, and EIA forecasts that 2018 coal consumption will
From Oxford Economics: In 2017, a gas crisis emerged in Australia’s East Coast gas market. Gas prices had increased rapidly from mid-2016 as the full effect of the three LNG projects starting operations on Curtis Island worked through the gas market, putting domestic energy users under pressure. In March 2017, the Australian Energy Market Operator
Can Australia’s gas catastrophe get any more stupid? Yes, it can: Australia’s fifth LNG import terminal has been proposed by a South Korean developer, striking a preliminary deal with the Port of Newcastle to boost gas supplies to the nation’s east coast as part of a $US430 million ($586m) facility. EPIK, described as a Seoul-based LNG
And surely it will do so. Two stories today show the lunacy, via AFR: The Morrison government has responded to backbench and industry anger by softening its proposed “big stick” laws to forcibly divest energy companies, but business remains hostile and there is no guarantee the laws will pass Parliament. In another day of energy
It is captured in this one chart from Art Berman: This one chart is the US shale revolution in global oil markets. What it shows is the forward curve for oil sales over time. As you can see, the curve has been smashed lower and flatter in recent weeks. What US shale does is find
So says the ABC: Renewable generation installation has accelerated to such an extent it is on track to provide almost 80 per cent of the electricity market by 2030, according to research from consultancy Green Energy Markets. GEM director Tristan Edis said the renewable energy industry has built itself up to such a significant scale
Via the AFR: East coast manufacturers are voicing frustration as domestic gas prices fail to follow international LNG prices lower, leaving them paying up to 25 per cent more for spot gas than equivalent export “netbacks” despite the dive in crude oil prices. A combination of cool spring weather in Victoria and an apparent reduction
Via Art Berman: Crude markets had a panic attack in August and September that sent prices soaring. Sanity is now returning. Prices have fallen but are likely to move even lower over the next few months. The panic attack was caused largely by Trump’s August 7 announcement that sanctions would be re-imposed on Iran. Anxiety
Via The Australian: The nation’s largest single electricity user has questioned how it will keep power running at its Tomago aluminium smelter under Labor’s 45 per cent emissions reduction target and $10 billion plan to turbo-charge investment in renewables, declaring that “batteries are not a solution”. …Energy Minister Angus Taylor warned yesterday that hundreds of
Via the ABC: Australian households will be offered federal rebates to install solar storage batteries under a federal Labor energy policy that will also direct billions of taxpayer dollars at solar, wind and hydro projects. Though Mr Shorten is likely to frame ALP adoption of the NEG as an attempt to find common ground with
