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

6

Gas cartel lays waste to aluminium industry

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

2

What would President Warren’s “frac ban” do?

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

0

Hedgies drive oil bear to new lows

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

12

Rod Sims must resign over energy markets failure

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

18

How to crash your energy bill 80%

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

0

When will oil crack?

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

9

Power grid descends into chaos as gas cartel laughs

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

7

Prospects for Aussie imports of own gas grow

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

12

Calls for domestic gas reservation as western pipeline mooted

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

34

How Norway made Australia look like a complete gas idiot

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

41

Bravo Mike Cannon-Brookes

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,

9

DLS demolishes gas cartel on Radio 2GB

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

6

Twiggy opens way to import Aussie gas to Australia

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

0

First US, then Russia, to ravage Australian LNG

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 –

6

Gas mafia demands crime pay

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

0

EIA cuts oil consumption again

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

7

Gas cartel wrecks Australian electricity grid

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

6

China builds Iranian oil gusher

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