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
LNG in all sorts, via Bloomberg: A slowdown in gas demand growth in China, the driver of global use over the past two years, is expected to slacken further, adding to investor concern as supply continues to build. Consumption in 2021-2025 will grow at a slower pace than it has in the current five-year period,
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
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
Our political system is now so short-sighted and media so stupid that we can generate panicked headlines like this: Victoria’s largest gas power generator won’t be back online until the end of December, escalating concerns about a heightened risk of blackouts in the state this summer. Origin Energy on Monday said the generator at its
From the WSJ journal today: An 1,800-mile pipeline is set to begin delivering Russian natural gas to China on Monday. The $55 billion channel is a feat of energy infrastructure—and political engineering. Russia’s most significant energy project since the collapse of the Soviet Union, the Power of Siberia pipeline is a physical bond strengthening a
It just keeps getting worse for Autralian gas users. Via Domain: Global energy giant ExxonMobil has scrapped plans to build a gas import terminal on the Victorian coast, deepening fears for large energy users about rising costs and a looming supply shortfall facing southern states. …ExxonMobil said it had undertaken an “extensive study” to determine
Only in a rarified Banana Republic does one have to wish for the death of an export sector to benefit the nation. That’s Australia and its east coast gas cartel which was forced to drop spot gas prices to $6.70Gj yesterday, the lowest price in two years. The key for more sustained price falls, and
What a bloody joke: Energy Ministers met in Perth on Friday for the first COAG Energy Council meeting in more than 11 months. Here’s some of what happened. First up, it won’t be quite so long between COAG Energy Council drinks next time around – another meeting has been scheduled for March next year. “Technology-Neutral”
Cancelations now as prices are lower than anyone can remember for winter around USD5, via Reuters: Singaporean gas importer and marketer Pavilion Energy has taken the unusual step of cancelling the loading of a liquefied natural gas (LNG) cargo from the United States, but has agreed to pay for it, several industry sources told Reuters.
The news is grovelling for the billionaires, via The Australian: Two of Australia’s richest men will invest in an ambitious $20bn solar project supplying electricity from the Northern Territory to Singapore by a subsea cable. Iron ore billionaire Andrew Forrest – ranked 8th on The List – Australia’s Richest 250 with an estimated $7.34bn fortune,
Today we have a nice demonstration of what happens to long term fixed assets when they are surrounded by ideological mismanagement for long enough. The damage takes decades to manifest but when it comes it is disastrous and there is nobody left to fix it. To wit, the National Electricity Market which is now being
Welcome to the new era of partisanship run amok, via the AFR: Federal Energy Minister Angus Taylor will seek to cut deals with “collaborative” states to shore up the destabilised national electricity grid, potentially isolating Victoria over energy and climate policy. …It is understood the bilateral agreements will involve funding or other arrangements to achieve
A new report by the Australia Institute estimates that through its sovereign wealth fund’s two-thirds ownership of Equinor, the Norwegian Government stands to make $8.1 billion from oil and gas exploration in the Great Australian Bight, which is greater than Australian taxpayers would make: Norwegian oil company Equinor is planning exploratory drilling for oil and
Voia Bloomie: The biggest producers in OPEC+ aren’t pushing for deeper oil-supply cuts when the group meets next month, according to delegates across the coalition. The Organization of Petroleum Exporting Countries and its allies are more likely to stick to their current output targets and encourage members to comply more fully, the delegates said, asking not
Via Bloomie: The answer to the renewable energy industry’s biggest challenge is emerging in the Australian outback. Early next year, one of the first power projects that combine solar and wind generation with battery storage is planning to start up in northern Queensland state. The Kennedy Energy Park, just outside the sleepy town of Hughendon,
It’s both darkly amusing and just as Origin Energy hollows itself out thanks to its monstrous gas gouge: Gas volumes and shipments up and local electricity sales crashing as they are priced out by the same gas shipments sending power prices wild. ORG is cannibalising even itself. Is it any wonder this spectacularly stupid business
It just keeps getting weirder, via The Australian: An extra $1bn will be pumped into the Clean Energy Finance Corporation to turbocharge development of next-generation electricity production and upgrade the transmission network to future-proof the grid and drive down prices. The first new capital provided to the CEFC since it was established in 2012 will
Via The Australian: High gas prices on Australia’s east coast have underlined the need for potential changes to the government’s gas export curb trigger to ensure sufficient supplies at lower tariffs are available for domestic users, Senate powerbroker Rex Patrick says. Australian consumers were paying 71 per cent more on average for spot gas at
Yes it is, even if the usual suspects try to distort the figures, via The Australian: Australian consumers were paying 71 per cent more on average for spot gas at the current market price than export “netbacks”, which measure the delivered price of LNG minus the costs of liquefaction and transport, a study from the
Via Goldman: Spot LNG freight rates more than doubled in the past month driven by a combination of contango-driven floating storage and US sanctions recently imposed on shipping companies. With such an increase in freight rates, it is possible that for some market participants currently floating LNG simply discharge their cargo and lease their tanker
Via Colin Barnett at the AFR: A modest reservation of some of that gas for the Australian market is just good policy. It’s not a sovereign risk, because it is our gas. With less than half the emissions of coal, it makes sense to put more gas into our energy mix. It might also help
Via Petroleum Economist: Vitol warns on LNG production shut-ins The trading house fears that US liquefaction plants may join the list of capacity on the side lines next year A market’s price is the function of the cost of the most expensive supply required to meet demand. A low price should indicate at least the
Via Yahoo: The rally in Asian liquefied natural gas prices may soon run out of steam as the bulk of winter purchasing is complete, leaving the market awash with supply. Benchmark LNG Japan/Korea Marker futures have jumped about 50% since mid-September to the highest in eight months as a boom in vessel rates and unplanned
Via Samantha Hepburn is the director of the Centre for Energy and Natural Resources Law, Deakin Law School, Deakin University: Right now, two projects have been proposed to import gas from overseas to supply eastern Australia. This is an absurd prospect. Australia is a resource-rich country, and exports more gas than any other nation. Why then,
Via the EIA: Source: U.S. Energy Information Administration, Weekly Natural Gas Storage Report Working natural gas inventories in the Lower 48 states totaled 3,519 billion cubic feet (Bcf) for the week ending October 11, 2019, according to the U.S. Energy Information Administration’s (EIA) Weekly Natural Gas Storage Report (WNGSR). This is the first week that Lower 48 states’ working
Here we go, via AFR: Australian smelters are struggling under high power costs and weak aluminium prices, and their reliance on fossil fuels is also becoming a competitive disadvantage, with Alcoa signalling that reducing its carbon footprint was an important goal of the “review” under way into almost half its global smelting fleet. …Federal Education
Via Wood Mackenzie: International gas and LNG prices have collapsed. For most of 2019, the global market has seen improving gas supply and intense supplier competition result in lower prices. In August 2019, Asian spot LNG prices went below U.S.$4 per million British thermal unit (mmBtu) (A$5.70 per gigajoule (GJ)), two and a half times
And so it goes. via NT News: THE operators of Darwin’s first gas plant, ConocoPhillips have sold the LNG plant and its North Australia assets for more than $2 billion. Oil and gas producer Santos says it will pay $2.04 billion for ConocoPhillips’s operating interests in Darwin LNG, Bayu-Undan, Barossa and Poseidon gas assets. …Santos
Via RBC: We dug deep into the numbers (and mapping) to better assess fundamentals and financial impact Investors are increasingly concerned about what a frac ban would mean for the oil & gas industry in the US and if this is even possible. Our rigorous approach analyzed the subject through discussions with industry
Via John Kemp comes weekly charts of hedge fund oil positioning which is definitely getting short: But has scope to get materially shorter yet: I still fear a Q4 price crash for oil as falling seasonal demand and wider global growth weakening combine to deliver another period of glut: It is my key trigger for
