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
The combination of an evil government and the reflexive support of Newscorp has doomed the Australian energy market. Via The Australian: Major Australian companies and small businesses are struggling to cope with record electricity price hikes that have forced them to seek alternative power sources, consider cutting thousands of jobs and pass costs on to
The truth comes out: Victorian Energy Minister Lily D’Ambrosio says the state will not sign up to Malcolm Turnbull’s signature energy policy tomorrow, demanding more information before the Andrews government makes a final decision by August. …Ms D’Ambrosio said Victoria was engaged in the policy but wanted a more detailed design of the NEG, demanding
Via the AFR: State Labor governments are expected to support the Turnbull government’s National Energy Guarantee at Friday’s Council of Australian Governments energy council meeting, but are keen to ensure a future Labor government can increase carbon emission reduction targets. In what is shaping as a major victory for federal Energy Minister Josh Frydenberg –
Via The Australian: “We’ve already seen what happens when states pursue different strategies, and it’s obvious we need a single, united approach,” Cement Concrete and Aggregates Australia chief executive Kim Slattery said. “Having these individual targets in addition to the broader framework will just create duplication, confusion and through that duplication you have additional costs.
Via Domainfax: The Turnbull government is set for showdown with states and territories over its signature energy policy after new details of the plan revealed any additional efforts by the states to curb carbon emissions would not count towards the national target. A key policy design paper circulated among the states at the weekend and
Australian manufacturing has been put out of business by two irresistible forces. The first is the power of the mining lobby and the second the power of the banking lobby. These two between them have scuttled, shaped, bullied and destroyed the Australian polity to their own ends so successfully that Australia now has the most
Twiggy wants into the gas cartel: Billionaire Andrew Forrest is studying a proposed 2,400-kilometre transcontinental natural gas pipeline across Australia as part of his iron ore company’s strategy to diversify. Fortescue Metals confirmed it has undertaken work for a duct that would link gas-rich Western Australia with the energy-strapped East Coast power markets. The project,
Some details leaked to the AFR’s Ben Potter: …Coal plants will have to compete on a level playing field with gas peaking plants, hydro and battery storage and “demand response” for the supply of “dispatchable” energy to firm up wind and solar power in the National Electricity Market, industry sources said. Concerns remain about the
It would be in the national interest. Curtis Island only has 1200 odd workers in its three LNG plants. Yet it is doing untold economic damage everywhere else, costing many thousands of jobs. This is because gas is the key input into the entire east coast energy system. As Innes Willox said yesterday: Gas prices went
Once again I find myself calling for the head of the manufacturing lobby’s CEO. Today Innes Willox spoke: We had cheap energy for a few reasons. Firstly, fuel was cheap. Black coal, brown coal and natural gas resources were huge relative to domestic demand. They were easy and cheap to produce. Fuel was often supplied
Mark Kenny says we shouldn’t underestimate Josh Frydenberg: How persuasive is Josh Frydenberg? He needs to be very persuasive if he is to corral a sceptical party room once state and territory ministers meet from next week to finalise the proposed national energy guarantee. The question holds the key to the government’s success on energy
Via Domainfax: Santos’s Chinese shareholder is understood to be in talks with suitor Harbour Energy to retain a major stake in the Australian oil and gas producer if Harbour’s $13.5 billion bid succeeds. ENN, which holds 10.1 per cent of Santos, made it clear on Monday night it was not interested in a cash offer
Hypocrisy thy name is Frydenberg, via the AFR Energy Minister Josh Frydenberg will today call for an end to the extreme ideologies on both sides of the energy debate, warning that consumers and taxpayers were paying the price of policy paralysis. Mr Frydenberg will escalate his pitch for the adoption of the government’s proposed National Energy
Via The Australian: Malcolm Turnbull has savaged Tony Abbott’s proposal to forcibly acquire the Liddell coal power station, declaring such a move would be against the values of the Liberal Party. The Prime Minister ruled out a compulsory acquisition of the ageing power station in the NSW Hunter Valley, although he signalled his hope that
The Australian reports on the crazy STO bid today: Former Woodside Petroleum and Seven Group chief Don Voelte says the Cooper Basin could be seen as a strategic national asset in Foreign Investment Review board deliberations on Harbour Energy’s $13.5 billion Santos takeover bid, and that it may make sense for Scott Morrison to require it
Via New Daily: The world’s biggest lithium-ion battery — built by tech billionaire Elon Musk’s company Tesla last year — has survived its first summer in South Australia’s mid-north. And according to a new report by the Australian Energy Market Operator (AEMO), it’s outperforming coal and gas generators on some key measures. Here’s a look
Via Domainfax: AGL will defy pressure by the Turnbull government to sell its ageing Liddell power plant, warning that interference in the market would raise issues of ‘‘sovereign risk’’ that could deter investment in new energy assets. In a rare interview, chief executive Andy Vesey told Fairfax Media the much-publicised interest in AGL’s Hunter Valley coal-fired
2GB radio this morning…
Yes, Australian energy has reached such epic proportions of stupidity. Via the AFR: BHP chief executive Andrew Mackenzie has been assured that power costs will come down in South Australia by new Premier Steven Marshall, amid number-crunching on a potential $2.7 billion-plus expansion of the Olympic Dam mine. …Mr Marshall said after the meeting with
Will the private sector build a coal-fired power plant? No. Taxpayer support or a dramatic policy shift would be required to convince investors to build a new coal-fired power station in Australia, experts say. Technological improvements, entrenched renewable energy subsidies and so-called “carbon risk” have positioned renewables plus storage as the most competitive option for
Via the AFR: US private equity firm Harbour Energy has renewed its takeover tilt for Santos, lobbing a $13.5 billion cash takeover offer with a high enough price to get engagement from the board, but with foreign investment approvals still outstanding. The $6.50 a share proposal is the fourth from Harbour after two made in
The AFR’s Ben Potter has done a good job of summarising recent improvements to the National Electricity Market today: We sweated through the second hottest summer on record, Hazelwood’s eight 200-megawatt brown-coal-fired turbines were benched, yet the National Electricity Market made it through with no serious supply shortages that could be blamed on lack of
Via the AFR: Victoria will experience significant gas shortages within three years unless additional supply is brought online, which could have flow-on effects for the whole National Electricity Market, according to a new report by the Australian Energy Market Operator. The report – which mirrors similar concerns about NSW’s gas supplies and prompted Prime Minister Malcolm
Via The Australian: Australia should focus on lowering energy costs rather than guaranteeing reliability, Australian Competition & Consumer Commission chairman Rod Sims said yesterday, as he declared high energy prices to be the biggest crisis facing the nation. Mr Sims said Australia should not “overdo” its focus on ensuring the reliability of energy supply, because
Via the AFR: Global energy giant Royal Dutch Shell is considering a move to break into Australia’s domestic retail energy market to take on the established players of Origin Energy, AGL Energy and EnergyAustralia in what could be the biggest shake-up of the energy market in decades. …”We see real opportunities to disrupt existing market
Via the AFR: The federal government is planning to toughen up on allowable deductions under the Petroleum Resources Rent Tax but is expected to exempt existing projects from the new regime to avoid the creation of sovereign risk. Sources have said the changes, to be announced at or around the May budget, will lead to
Via the AFR: Australian Competition and Consumer Commission chairman Rod Sims has warned the Turnbull government’s National Energy Guarantee could stifle competition in the energy sector or push up prices for businesses and consumers if it was not properly designed. While the Energy Security Board said competition issues could not be given further consideration until
So says Rystad Energy: “Shale is not dead, shale is reborn and has strong growth potential [even] at $US40 to $US50 oil,” said chief executive Jarand Rystad at the opening of the firm’s Sydney office. “It has the potential to again crush the oil market.” Rystad, one of the few to correctly forecast that US
I am yet to meet an oil and gas bear. BofAML is typical: More projects likely to get off the ground this year We view the prospects for the US liquefied natural gas (LNG) sector as largely positive. We expect a number of final investment decisions (FIDs) this year as we move closer to meeting
Via Reneweconomy: The South Australia state government is to provide a $10 million loan to help UK billionaire Sanjeev Gupta trump fellow US billionaire Elon Musk and build an even bigger battery at Port Whyalla. Gupta’s SIMEC ZEN Energy is intending to build a 120MW/140MWh – as revealed in RenewEconomy earlier this week when we wrote of
