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
AGL has received a pretty worthless bid for Liddell Power station this afternoon, via ASX: But over at The Australian, which values coal a little more highly than does Alinta, the bid is 1.2bn: Energy retailer Alinta has made a $1.2 billion bid for the Liddell power station in NSW in a move that will
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If a report from Domainfax is true then the Xenophon dregs are complete morons: It is understood next month’s budget will tackle longstanding concerns about the way energy companies are taxed by curbing “uplift concessions”, which determine tax deductions associated with exploration and construction. But in a concession expected to win industry support, the changes will exempt
Perverse stuff from The Guardian as it recounts Alan Jones talking with Josh Frydenberg yesterday: “We’ve also seen states lock up decades worth of resources when it comes to gas,” the energy minister noted. Jones suddenly sensed he might have washed up in an episode of let’s turn the tables. “Oh, that’s rubbish,” he exploded.
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You couldn’t make this stuff up, via the ABC: The Federal Government has awarded a $6 million grant to a gas producer wholly-owned by a massive Chinese company said to have close links to the country’s Communist Party. But a government grants specialist says under the grant agreement there is nothing stopping the company sending
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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
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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
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2GB radio this morning…
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