Is funding a new gas-fired power plant in the Hunter Valley “a grab for votes” in the upcoming by-election? #QandA pic.twitter.com/OSov1ZLeWa — QandA (@QandA) May 20, 2021 It’s pretty simple and not funny: East coast LNG exporters lied about having enough gas when they built their export plants. They then bought all of the cheap
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.
I long ago ran out of pejorative adjectives to describe the Morrison Government machete hacking into the Australian energy market. Today it swings another stroke into the pulpy corpse: $600m will spend on the Hunter white elephant power pork station. The 660MW beast will fill a notional shortfall predicted by the AEMO to 150-200MW, easily
There have been many opportunities to save Australian manufacturing at little cost and great gain: The property bubble could have been reined in 2003, 2008, 2013, 2019 and today to stop the financialization of the economy that was driving up the currency. Mining might have been taxed properly and recycled as an SWF offshore in
More good news today on the Australia/China divorce from the anti-Australian nutters at SCMP: China aims to cut more Australian LNG imports. Turkmenistan is already China’s largest gas supplier. That will expand. There will also more trade, investment and connectivity. That’s more like it. Turkmenistan is a semi-communist dictatorship so fits right in with the
Australia’s China divorce hits another milestone today. Following recent Morrison Government warmongering and ripping up VIC’s BRI deal, the blowback has arrived as the next commodity to be targeted is LNG: Two Chinese importers have been told to avoid Aussie LNG. China imported 29mt in 2020. About 10mt of that is above contract obligations. Recall
For years we have fruitlessly pointed out the folly of Australia’s east coast gas exports. For the nation, the three LNG export plants built on Curtis Island were a shining example of Banana Republic commodity economics gone drastically wrong. The exports made no money for the producers, who were forced to write down tens of
Not that it was ever in doubt. The gas cartel long ago captured the Morrison Government so this was a foregone conclusion: There will be no intervention in gas prices by the Morrison Government. It prefers to lift supply and let “the market” drive prices. Except that there is no market. There is an export
The Morrison Government’s “gas-led recovery” has been rubbish from the outset. It was a fix, not a policy process. Nobody is going to accuse me of being anti-gas. I’ve been campaigning for more of it for two decades. But, instead of undertaking consider economic process to extract more of it, the Morrison Government has butchered
Morgan Stanley with a note I very much agree with: Inventory draws and demand recovery have supported oil prices in recent months, but two factors are starting to take some wind out of the sails of this bullish thesis: Iranian exports and US drilling activity.We moderate our price forecast for 3Q and close our long
TS Lombard with sounds analysis: Until not that long ago, the idea was still taken seriously that peak oil would be supply-side driven and triggered by sky-high prices: but as it is now clear that the oil case will resemble all previous energy transitions, useful lessons may be had from the most recent such precedent–peak
For anyone that has been living under a rock with no utility bills for eight years, today’s gas cartel drivel might make some sense: The Morrison Government must not engage in gas market central planning, said pipeline monopolist, APA. We need transparency for prices from consumers, said the oil and gas lobby. Only 3% of
It is the favourite trick of investment banks to set their own forecast so that they can be “surprised” when data misses come about. They all use it to manipulate price action to benefit their trades. A nice example is Goldman in the oil market today. The pre-Easter OPEC was bearish for prices as OPEC
Here it is in black and white from the Australian Energy Market Operator: This GSOO forecasts an improved gas supply outlook compared to last year, largely due to Australian Industrial Energy’s (AIE’s) commitment to the Port Kembla Gas Terminal (PKGT) in New South Wales. This is Australia’s first liquified natural gas (LNG) import terminal, and
If you will pardon me for saying so, this is the economic equivalent of sexual assault. The Australian is citing the ACCC which has: Slammed the east coast gas cartel for failing to even draft a code of conduct that will engage bulk gas users. Rod Sims said the Government will move on mandatory price
I have been bullish on oil because I expected it would take a little more time to break supply discipline than in the past as a strong demand rebound was underway. Make no mistake, oil is a very manipulated market so supply discipline is the only question that matters given a recovery in demand. Cornerstone
Friday night witnessed a big bounce in technology stocks. The Nasdaq jumped 1.55%. It seems risk is back for growth and technology stocks. Or is it? I can see this perfect head-and-shoulders top dropping 30% from here. Why? The harpoon that has pricked the technology bubble is rising yields as markets fret about inflation. Growth
For years labor has played a double game on the east coast gas cartel. It has intimated at various times that it would adopt tougher domestic reservation. But it has never had the cojonies to declare it given its fear of another mining backlash. Now, under the infinitesimal target politics of Anthony Albanese, it appears
Imran Kahn, Javed Miandad, Wasin the Wrecker, the Rawalpindi Express. Australians are used to looking to Pakistan for fine cricketers and tearaway pace bowlers. What we are not used to is Pakistan showing us the way on how to manage commodities. Yet that is exactly what Australia’s relentlessly gouged large-scale gas consumers need to do
Goldman is pumping this one like there is no tomorrow: The rally in oil prices has paused after Brent prices briefly reached the $65/bbl summer forecast we first set-out last August, on the realization that frigid US weather will only marginally tighten the global market and over concerns for a return of Iranian barrels. Despite
Here’s the ACCC take on the Morrison Gas Unplan: Gas prices fell significantly during the past year, driven in part by the COVID-19 pandemic. While lower gas prices are providing some relief to manufacturers and other gas users on Australia’s east coast, prices were still higher than export parity, the ACCC’s latest gas report reveals. The report,
How high for the oil recovery is always an important question given its implications for inflation. At the moment, the oil market has returned to its usual bullishness with all sorts of analysts forecasting a new supercycle: For me, this is deja vu all over again. There is no doubt that the oil market has
In recent years Australia has displaced Qatar as the world’s largest LNG exporter. But the Qatari’s are not happy about it (neither are Australians!) and have long planned their fightback which will take the form of a monstrous 33mt expansion of cheap conventional gas. The Qatari energy minister is full of bullishess at the FT:
Aussie gas is much cheaper in Asia again than it is in Australia. It happened last week as Brent oil rallied and the Japan-Korea Marker for spot LNG cratered to near $7Gj from above $32Gj recently as the Asian winter warmed up. Futures point it even lower. This means that the contract gas price paid
As it was always going to, via Platts: Booming demand for LNG in Asia due to frigid winter weather put LNG carrying capacity at a premium in January. With LNG shipping rates having retreated from record highs last month and with low stocks in Europe, the market dynamics could shift in February toward the latter
Via Platts: The decline in gas-fired power generation to a 15-year low in eastern Australia’s national electricity market (NEM) in October-December may reflect the transition of country’s largest source of greenhouse gas (GHG) emissions to a lower carbon intensive sector. But it was not what the Australian government had in mind when it unveiled its
Via The Australian comes another useless sop to the gas export cartel: Scott Morrison has struck a two-year deal with large east-coast LNG exporters to offer uncontracted gas first to Australian companies, in a bid to keep prices down and lower costs for manufacturers as part of the government’s COVID-19 recovery plan. But the deal,
Via CCP mouthpiece, The Global Times: The price of liquefied natural gas (LNG) has surged to record highs in recent tradings, with the weekly spot price assessment settled at an all-time-high price of $21.45 per million British thermal units. While most market analysts are focusing on the underlying market factors including seasonable price movement, a