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

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ACCC: Gas cartel gouging happily on

The ACCC is out with its latest gas failed market report: This is the third interim report of the Australian Competition and Consumer Commission’s (ACCC) inquiry (‘the Inquiry’) into gas supply arrangements in Australia. The ACCC has continued its focus on the operation of the East Coast Gas Market, where there are immediate and longer-term

4

Xenophon dregs mull national gas suicide

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

7

Chevron puts match to transcontinental gas pipeline

Via The Australian: A new $US1 billion ($1.3bn)-plus petrochemical plant proposed for development on Western Australia’s Burrup Peninsula is facing a major hurdle after oil and gas giant Chevron told the proponents it may not be able to supply gas to the project. The Australian can reveal that a consortium of privately owned Coogee Chemicals,

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The NEG should be renamed MAD

Via Ben Potter: The Turnbull government looks set to win approval in-principle from states and territories for the architecture of its National Energy Guarantee at Friday’s energy ministers meeting. But a key detail of the design – the target for the electricity sector to deliver carbon emissions cuts of just 26 per cent from 2005

2

Frydenberg mummifies energy truth with red tape

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

8

Victoria: There is no NEG

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

6

Do-nothing energy guarantee delivers absolutely nothing

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 –

7

Industry demands higher energy costs

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.

9

Twiggy Forrest versus the Australian national interest

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,

2

Do-nothing energy guarantee to do…nothing?

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

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Five reasons why the RAAF should carpet bomb Curtis Island

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

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Innes Willox should be fired

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

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Frydenberg’s energy wreckage is much worse than Abbott’s

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

13

Dr Frydenberg’s energy snake oil is pure poison

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

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When should an energy asset be nationalised?

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

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As Dodos debate coal, renewables fly

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

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Whatever the ACCC says on energy, do the opposite

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

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Outraged BHP demands cheaper energy from…err…BHP

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

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The bizarre demand for a COALition power plant

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

10

The crazy bid for Santos

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

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Coalition energy lunacy deepens

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

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AEMO: Gas shortage not fixed

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