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 Australian: The government has been warned of a looming gap in the national electricity supply as coal-fired power stations shut down, highlighting the need for urgent decisions to build new generators that operate around the clock. …The government is shifting its focus to the reliability of new energy generators, as well as the
Via the AFR comes five solutions: One priority is to ensure the existing coal fleet which will supply the bulk of our power for a decade or more as we continue the transition to clean power is as efficient and reliable as it can be…Engineers at GE – a traditional power engineering giant now heavily
Dalian has opened OK: So too Big Iron with BHP and RIO nudging break outs: Big Gas is stable, more than can be said for pensioner energy bills: Big Gold is powering. I’m still a trading seller into this strength. DPRK tensions should fade: Sleaze Bank has opened a trap door: And is rapidly approaching
The gas cartel is undeterred by Do-nothing Malcolm: A softening in east coast gas prices in recent weeks has yet to bring down prices offered to manufacturers to levels they say are affordable, adding pressure to the federal government to slap restrictions on Queensland LNG exports for 2018. Sources close to gas buyers say that while the
Via The Australian: Malcolm Turnbull has seized on energy spokesman Mark Butler’s admission that Labor was warned that customers would be hit with higher energy prices from the gas exports it authorised in government five years ago, blaming the Gillard government for the spike in gas prices which has seen energy bills rise dramatically. Mr
Dalian is still running: Big Iron is down as it goes ex-div: Big Gas is running too. The two pensioner rorts, STO and ORG, are re-rating I reckon. The market does love a rent-seeker: Big Gold loving it. I’m still a seller here on the basis that the USD fall is (largely) done: Sleaze Bank
From Adam Creighton today: Taxpayers will have paid more than $60 billion through federal renewable energy subsidies by 2030, about twice what the crumbling car industry received over 15 years and enough to build about 10 large nuclear reactors. The government’s large and small-scale renewable energy targets, which will compel energy retailers to buy 33
Via Citi comes the horribly slow process of oil rebalancing: We’re at least a year from reasonable inventories if not more. And that with 2mb/d held off the market by OPEC and likely to leak. Then there’s the hurricanes: Five days after Hurricane Harvey hit the US Gulf Coast, it still seems early to
Via Domainfax: The hype was interstellar, but the content …more terrestrial. The resting face of Energy Minister Josh Frydenberg presaged the package’s modest scale. Electricity companies will write to a million households by Christmas to offer them cheaper power plans, Prime Minister Malcolm Turnbull demanded. …”This is a very big breakthrough, and it’s happening here and now,” the
Via a roundly climate change skeptical Richo: Malcolm Turnbull is running out of options as to what issue he might choose to fight the next election. This week he threw away what seemed to me to be his best option. By far the biggest issue in Australian politics today is electricity prices. Neither the Coalition
Break! XJO has just seen its symmetrical triangle break down the wrong way. It’s taken out the 200DMA to boot: This clearly opens the way for lower. Thanks DPRK! This should still lead absolutely nowhere in terms of North Asian conflict. Japan and US have requested a UN Security Council meeting. But we’ve yet to
Jonathon Tepper has a new name for the CBA: And investors are voting with their wallets, hitting new lows: The chart still suggests no support right down to $70 and with the politics getting worse who knows? The under-performance is worsening but the whole sector appears increasingly tarnished: Meanwhile today, Dalian has managed to ease
Do-nothing Malcolm is on the move to higher airs: The nation’s electricity industry chiefs will be hauled in by Malcolm Turnbull for the second time in three weeks following an audit that revealed more than a million households are still paying the highest price rates imposed by energy retailers. With the government seeking to regain
Lot’s of good material today on Australia’s great energy debacle. First, Thomas Parry foundation chairman of the Australian Energy Market Operator 2008-2015 does a great job of describing the history: Why is electricity in Australia now so expensive when not that long ago it was cheap? Following the UK privatisation model, Victoria – under a Liberal government
Dalian is warming up again today: XJO is up too as its symmetrical triangle narrows: With Big Iron powering, it would seem that the odds favour an upside break from that pattern: Big Gas also appears constructive as it ravages east coast pensioners: And Big Gold looks positive too as it climbs: But holding it
No Wall St rally for you! XJO is kidding: As Dalian crashes: Big Iron is off: Big Gas looks strong. If you don’t mind stealing from pensioners then the charts look constructive: Big Gold is firm too but I’m definitely a seller on the notion that Trump has bottomed: Big Bubble is getting hosed as
Dalian is up again today but looking a little tired as parcel limits kick in: Big Iron ore still roaring: Big Gas is outdoing oil: Big Gold looks strong: Terror Bank continues to under-perform: And Big Liar to ignore reality, though MEA has faded (or that might be an uber-bullish “cup and handle” formation: Finally,
Like a moth to the flame, Judith Sloan just can’t leave the energy crisis alone: If sticking with the damaging renewable energy target and committing to a wildly excessive emissions reduction target under our commitment to the Paris climate agreement are not ideological, I’m a monkey’s uncle. …You only have to think about it for
Banana Man is once gain in control in China: Big Iron is loving it with FMG up 7%: Big Gas is also up with oil: Big Gold is stable. I remain a seller on the bold hope that the Trump Administration is at the lows (for now): Big Bubble is getting caned, especially Terror Bank
From Energy Minister Josh Frydenberg: It is not realistic to expect the return to $3-$4/gigajoule that Australians enjoyed less than a decade ago. The creation of an export market on the east coast means that our domestic prices are linked to those overseas, just as they are for other internationally traded commodities such as iron
Dalian has tried but largely failed to blow off again today: Big Iron is down: Big Gas too. ORG is showing promise, and why wouldn’t it, so long as you don’t mind stealing from pensioners: Big Gold is mixed and I’m still a seller here. North Korea is a non issue and the ECB is
The commodity pain trade is roaring upwards today with iron ore off the hook up 6%: Big Iron is pretty circumspect about it: Big Gas is weak, notably so when one reads all of the positive guff coming from brokers: Big Gold is hot as it signals more USD weakness. I am a seller here
The gas cartel is in full swing this week. We had the Santos write down yesterday. Today Origin, as it’s white elephant hoses another $3.1bn into the sea: But who cares when your artificial gas shortage throws up electricity profits growth like this: Recalling that gas sets the price of electricity in the National Electricity
From Australia’s worst company, STO: That’s nearly $3bn in write downs on GLNG now. It only owns 30% of the great $18.5bn elephantine failure so over half of the carrying value is now gone. Worry not, the rest will disappear in due course as those oil forecast are never met. As it throws loss-making gas
I’ve been warning of this for a few years, via Macquarie: Event WPL, OSH and STO release their 2017 half-year results on Aug 16, 22 and 24, respectively, and we updated our outlook ahead of results. Impact Impairment risks: We believe both STO and WPL could announce impairments for H1CY17, together totalling ~US$1bn.
