Via the AFR: AGL Energy has shrugged off scepticism about its $250 million plan to import gas into Victoria, kicking off an official process to invite LNG players to supply the project. A formal request for proposals from a group of pre-qualified LNG suppliers was issued on Friday as AGL took a decisive step to follow
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.
Quite rightly: US player Harbour Energy’s ambitions for an $11 billion takeover of Santos have run immediately into political hot water, as South Australian Treasurer Tom Koutsantonis signalled the state would seek to prevent the oil and gas producer falling into foreign hands. “The state government would be very concerned by any foreign takeover of Santos,”
Via the AFR: Big American oil is preparing to make a $11 billion all-cash takeover offer for Santos as the next step in play for regional and global relevance in rapidly reforming liquid natural gas markets. A consortium of powerful global energy investors, led by a former executive director of Royal Dutch Shell, Linda Cook,
Via The Australian: Queensland is exporting gas at record rates as resurgent oil prices boost LNG contract revenue and a Chinese push to reduce coal-fired power and heating pushes LNG spot prices and medium-term demand forecasts higher. China’s campaign to clean its air, particularly around Beijing, has already had a big impact on the prices
Via The Economic Times: India will save about Rs 4,000 crore after it got US energy major Exxon Mobil Corp to lower the price of liquefied natural gas (LNG) after the new rates kick-in from January next year. Petronet LNG Ltd, India’s biggest importer of liquefied natural gas, in August 2009 signed a 20-year deal
From The Australian: Gladstone’s big gas export plants pumped out LNG at near record rates last month, drawing gas from as far as Victoria to take advantage of resurgent LNG spot prices, despite major maintenance works. The situation, combined with rising oil prices, has helped send Origin and Santos shares to two and one-year highs,
Hoocoodanode, via the AFR: Industrial energy buyers on the east coast are seeing a fresh deterioration in the choice and terms of gas supply offers, only weeks after the federal government’s deal with Queensland LNG exporters for additional local supplies. Businesses seeking firm gas supply contracts are often finding only one retailer with gas available
Via the FT: Oil traders have a new political risk factor to absorb from Saudi Arabia with the move by the powerful Crown Prince Mohammed bin Salman to detain some of the kingdom’s most prominent business people, officials and princes. Saudi Arabia is the world’s second-largest crude producer, the biggest crude exporter and has the
Nobody cares but: GFG Alliance chairman Sanjeev Gupta says Australia has the highest power costs in the world when its high wholesale prices are combined with its huge volatility. But the British billionaire industrialist, who has moved to Australia after buying the stricken Arrium business, including the Whyalla steel plant this year, has not called
From the Daily Heil: Billionaire energy mogul Elon Musk was almost brought to tears by Australia’s deepening electricity crisis that has prices soaring out of control. The Tesla boss was confronted with figures showing record numbers of people were disconnected because they couldn’t pay their bills. ‘Wow, really?’ he said in disbelief when told by 60 Minutes
The LNGers get such an easy run considering the economic black hole they have unleashed. Via Domainfax: Gas producer and exporter Australia Pacific LNG has promised to significantly boost the supply of natural gas to the domestic east coast market, after striking a sales agreement with major shareholder Origin Energy. APLNG, a joint venture between
And nobody has yet discussed it. As the Australian dollar falls, the price fetched for Aussie LNG in Asia is going to rocket upwards. Here’s what it looks like with constant oil prices and an AUD that falls progressively to 55 cents over the next two years: Yes, regional LNG will be trading at $16Gj
Via SCMP: This winter, more homes in China will be heated up by natural gas as Beijing would have liked amid its push for local governments in northern China to use cleaner burning gas. The irony however, is there may not be enough supply to go around. Industry executives and analysts are already warning of
Via the AFR: The key Labor states of Victoria and South Australia have left the door open to the National Energy Guarantee while maintaining their rage against the Turnbull government for shifting the policy behind their backs. …Grattan Institute energy program director Tony Wood said Labor will seek concessions for its support so as not to be
Via the US Energy Information Agency: Source: Australia Energy Market Operator Gas Bulletin Board, IHS Australia became the world’s second-largest exporter of liquefied natural gas (LNG) in 2015 and is likely to overtake Qatar as the world’s largest LNG exporter by 2019. As Australia’s LNG exports have increased, primarily from LNG projects in eastern Australia, the
Ian Verrender does a good job today at the ABC: A little over a decade ago, then-West Australian premier Alan Carpenter had his back against the wall. Global oil and gas giants determined the new wave of Liquified Natural Gas investment would not be subject to WA’s longstanding gas reservation policy, and were threatening to
Via The Australian comes the marvel of Australia’s LNG boom: The huge impact of the OPEC oil cartel’s battle with US shale producers has been starkly revealed in a national industry survey that says Australia’s oil and gas industry logged a combined 2015-16 underlying net loss (excluding writedowns) of $4.5 billion. The results of the
The energy circle of farce is now complete: Payments of $50 a year for every Queensland household will be handed out by the Palaszczuk government as part of an “affordable energy” plan released ahead of a state election. The money will come from the dividends of state-owned power companies that had been used to pay
UBS has a go at it today: East coast gas market dynamics are going through a fundamental shift The market is resigning itself to the fact that recent actions to restrict LNG exports and divert gas into the domestic market will not have a significant impact on bringing down east coast gas prices. So what
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
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,