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

1

Oil is buggered

The one commodity market that is behaving rationally about global growth right now is oil. The world is swimming in the stuff despite oodles sitting on the sidelines. Chinese demand is down 4mb/d. There has been some offset in supply thanks to Libyan troubles removing 1mb/d but nobody there has much incentive to keep the

4

Finkel endorses ScoMo gas plan for climate change

It never ceases to amaze. Dr Alan Finkel today: “Make no mistake, this will be the biggest engineering challenge ever undertaken. The energy system is huge, and even with an internationally committed and focussed effort the transition will take many decades.” “It will also require respectful planning and re-training to ensure affected individuals and communities,

2

Asian gas price poleaxed

Via Platts: **The impact of China’s coronavirus outbreak on LNG market is expected to worsen in coming weeks as economic activity in key manufacturing hubs struggles to rebound, keeping a lid on natural gas demand and triggering more LNG trade flow disruptions. **China’s state-owned CNOOC has declared force majeure on LNG contracts. **CNOOC remains most

17

Centre Alliance must block supply on broken gas contract

As best as they can. Center Alliance has been betrayed by the Prime Minister on the most important reform in the Australian economy today: gas reservation. Let’s recall where it began. Previously at The Australian: Centre Alliance senator Rex Patrick wanted the government’s intention on gas in writing before he offered his party’s support for

6

ALP: Zero tax too high for gas sector

It’s wonderous the tricks a whore politican will turn to earn a quid, via Twitter this morning: Freshly minted Resources Minister Keith Pitt is off to an inauspicious start, threatening a big new tax on the Australia’s wealth-creating gas sector just two days after his swearing-in. The Morrison Gov’t is too focused on itself to

3

Shell adds renewables to vertical energy gouge

One might ordinarily cheer this: Energy giant Shell has approved a 120MW solar plant in Queensland’s Western Downs region, two months after buying a stake in Australian renewable power developer Esco Pacific. Shell will buy supplies from the Gangarri project near Wandoan, due early 2021, with the same amount of electricity bought from the national

11

Chinese LNG demand “disappears”

Via The Australian: “LNG demand has fallen off a cliff since January. An LNG trader just told me Chinese demand has ‘disappeared’, and buyers will be looking at all options.” The move could prove a major risk for Australia’s LNG export industry, which supplied 46 per cent of Chinese LNG in the 2019 financial year,

6

Asian gas price hits record low as Canavan rorts Australia

It is carnage in Asian gas markets, via Platts: The outbreak of coronavirus in China has dampened market sentiment, with market sources hearing Chinese buyers delaying spot cargoes, re-selling some February and March cargoes and potentially delaying their term off-take. “Everyone is taking a wait and see approach as we do not know yet how

23

It begins. Chinese oil demand crashes

It begins. Via Bloomie: Chinese and Western oil executives, speaking on condition of anonymity because they aren’t authorized to discuss the matter publicly, said the decline was measured against normal levels for this time of year. It’s a measure of the current loss in demand, rather than the average loss since the crisis started, which

51

SmoCo crashes renewable investment

As if we needed this, at the AFR: Investment in renewable energy projects collapsed by more than 50 per cent last year, according to fresh data from the Clean Energy Council that counters Prime Minister Scott Morrison’s claim of “record” spending in the area. The number of large-scale renewable energy projects that reached financial close

42

Six years late, SmoCo discovers gas climate change solution

Via SmoCo this afternoon comes a notion six years too late: “We need to get the gas from under our feet. There is no credible energy transition plan for an economy like Australia, in particular, that does not involve the greater use of gas as an important transition fuel.” “There are plenty of other medium

7

A brawl with Big Oil is just what SmoCo needs

Late Friday I reported on a possible victory for MB: The review recognises that price is an important indicator in establishing whether the domestic market is functioning effectively and considers that the ACCC’s forward LNG netback price series is the most applicable prices when estimating the likelihood and extent of a potential shortfall. As such,

2

ADGSM review recommends gas reservation price trigger

Sort of. From the Australian Goverment: The Australian Government introduced the Australian Domestic Gas Security Mechanism (ADGSM) in July 2017 in response to a forecast gas supply shortfall in the eastern domestic gas market. The ADGSM provides the Government with the ability to restrict LNG exports to secure domestic supply. On 6 August 2019, the

0

UBS: Gas crash to provide power price relief

Via UBS: Wholesale electricity price futures are sharply lower Our updated wholesale electricity price forecast expects prices will average $74/MWh across the National Electricity Market (NEM) in CY20, declining to $70/MWh in CY21—reflecting a material revision down from our prior forecast. Baseload futures through CY20-21 are sharply lower than 3 months ago and our mark-to-market

12

Productivity Commission’s gas WTF

These test tube economists are a plague, via The Australian: Forcing Australian gas exporters to increase their domestic output could “distort resource allocation” and drive up energy costs over time, the Productivity Commission has warned. …The Productivity Commission said reductions in production could deliver lower gas supply volumes, shifting higher costs on to the gas

0

The oil glut that just won’t budge

From the EIA: EIA forecasts Brent crude oil spot prices will average $65 per barrel (b) in 2020 and $68/b in 2021, compared with an average of $64/b in 2019. EIA expects West Texas Intermediate (WTI) crude oil prices will average about $5.50/b lower than Brent prices through 2020 and 2021, compared with an average

8

Gottliebsen’s stinking gas cloud

He’s as persistent as he is horrifying. Gottiboff today: Queensland ALP Premier Annastacia Palaszczuk must be enjoying exposing weaknesses of the “new Labor” policies of Victorian ALP Premier Daniel Andrews. Queensland’s Senex has signed a contracts to supply its recently-discovered Surat basin coal gas to CSR’s Brisbane brick and plasterboard operation, as well as packaging

0

Propaganda push seeks gas reservation stall

Via the AFR: Gas supply on the east coast gas market has dramatically loosened up thanks to record production, bringing down domestic prices and weakening the case for federal government intervention, according to a leading research consultancy. …Despite only a modest rise in LNG exports from Gladstone, the market saw a surplus of 17 petajoules

0

Europe debates designating LNG climate hostile

Welcome to the new frontier of LNG doom. Via FTAlphaville: This is a guest post by Rauli Partanen, an author, analyst and communicator on climate change, environment and energy systems. Partanen co-founded and leads Think Atom, a non-profit think tank advocating nuclear energy alternatives. In this post he argues Germany’s interests in natural gas are jeopardising the European Taxonomy for