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 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
Via the AFR: Labor says the certainty created by having an energy policy and the falling cost of renewable energy means emissions can be cut and prices lowered at the same time. Speaking ahead of the launch of Labor’s energy policy on Thursday, shadow climate change and energy minster Mark Butler said asking people to
It’s all so horribly predictable. Via the AFR: After announcing that the world has arrived at a “new era for energy”, Coleman asked: “Where is the vision from our leaders today?” …”as renewables achieve scale, we risk wasting money on building more power into the system, resulting in generation overload. We risk ending up in
Via Westpac: Chinese steel, iron ore and coal Chinese environmental policies have boosted the demand for higher grades of iron ore but in the long run they may drive a structural shift in demand. Chinese mills are increasingly using scrap steel as its supply grows with more buildings being torn down, more cars crushed and
And we thought our LNG boom was big. Via Reuters: U.S. liquefied natural gas company Tellurian Inc said on Wednesday it expects to start construction on its Driftwood LNG export terminal in Louisiana in the first half of 2019 and begin operations in 2023. Chief Executive Meg Gentle said in the company’s third-quarter earnings that
Yay! Love it. MB argued that when Shell bought QCLNG two years ago, the ACCC should have forced it to divest Arrow. It is the last big, undeveloped gas field on the east coast without community restrictions: Instead, the ACCC let the consolidation complete the export cartel. Now all of the Arrow gas is going to
A moderate victory over the gas cartel at Domainfax: Oil and gas giants will be hit with a $6 billion tax hike over the next decade following years of concern that Australia has been hemorrhaging lucrative revenue to multinationals. The decision was made after an 18-month wait for the Coalition’s response to a landmark review into
This might be hard for you to believe. As we know, President Donald Trump does not believe in climate change. Indeed, he professes a love for coal and delivers policy in support of it. The US has trashed multilateral climate change agreements over and again while Australia has supported them. To the Fake Left the
Exciting news via Platts: On October 22, Japan’s Ministry of Economy, Trade and Industry unveiled a model clause that can be used by LNG buyers to remove destination restrictions from long-term contracts. Such restrictions have become more relaxed in renegotiations of LNG contracts or in new contracts among market players, Hiroshige Seko, minister of economy,
Via AFR: Mike Cannon-Brookes’ campaign to reclaim the phrase “fair dinkum power” from Prime Minister Scott Morrison has been swamped with offers of support, and the Atlassian billionaire is in the process of registering a trademark for a logo to promote renewable energy. Mr Cannon-Brookes said he had had hundreds of tweets and emails expressing
The Oxford Institute for Energy Studies has an in-depth piece out on the cost of LNG plants, looking in detail at the drop in LNG construction costs and how maintainable the falls are in construction costs: As you can see, the Australian plants dominate the top of the cost table, with many of the more recent plants
I know this bloke means well but having $6bn does not make you expert on everything, via Twitter: ⚡ Argh! Bullshit mate 😡 @ScottMorrisonMP you’ve made me mad & inspired me. We need a movement. We need a brand for Australia’s energy future. We need a rallying cry for Australians who believe in ☀️ 🌬️
Not everything about the gas cartel is bad. It is an effective and massive private carbon tax and that has predictable results, via the ABC: Andy McCarthy has been installing rooftop solar panels in Victoria for 18 years, but even he is stunned by the massive recent growth in demand. “It’s been crazy,” he said.
Via The Australian: Labor will take the National Energy Guarantee — devised by Malcolm Turnbull and Josh Frydenberg — to the next election as its preferred mechanism for reducing emissions. It will scale up the target in the NEG to meet its goal of reducing emissions by 45 per cent. Opposition environment spokesman Mark Butler
Via the AFR: Labor will side with business and oppose the government granting itself powers to force the divestment of energy companies, arguing it is an ad hoc move which would have no impact on power prices and only serve as an investment risk. The Coalition is divided on the so-called “big stick” powers with
Via the AFR today: From the start, the structure of the ADGSM, with its annual decision on whether to curb LNG exports, was seen as vulnerable to “gaming” by gas buyers as they sought to access lower prices. Last September industry sources and analysts said some commercial buyers were deliberately holding off from signing new
From Renegade Economist comes the fantastic Bruce Robertson (IEEFA) on how Australia destroyed its own energy markets: We discuss policies to reduce gas prices as per international best practice. In light of further consolidation in the industry, we discuss how gas sets the baseline price for energy production in the nation. How much could energy
Hope is kindled: Welcome aboard, Rod. This will aid Labor to tackle the gas cartel when it takes power. It must do it first and foremost or as falling house prices drag down the AUD then we’ll see a new gas and electricity price shock smash into the economy. It will be made even worse
