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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Will Labor be any better on energy?

Bill Shorten has also spoken on energy today at the AFR Summit: Mr Shorten said Labor would also introduce a national interest test for all new LNG facilities to “guard against a repeat of the current crisis”. He said Labor also supported the “responsible” development of onshore gas although fracking was largely a state issue.

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CET goes way of carbon price

Farewell CET: Energy Minister Josh Frydenberg has all but ruled out a clean energy target, saying the transition to lower greenhouse gas emissions cannot come at the expense of the reliability and affordability of our electricity system. Mr Frydenberg told the National Energy Summit in Sydney that emissions in the electricity sector had fallen over

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Daily energy disaster update

Judith Sloan lost it on energy over the weekend: Move over, Ponzi; forget Bernie Madoff; ignore Enron; and dismiss collateralised debt obligations ­associated with subprime mort­gages. Without a doubt, the biggest scam perpetrated against taxpayers and consumers is ­renewable energy. And if you think this scam is just an Australian phenomenon, think again. With very few

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Finally the great gas smash begins

It’s taken five years but the great gas smash has finally begun. The media is full of frenzied options and commentary today on how to fix it. A magnificent stoush is underway between Do-nothing Malcolm and Alan Jones: Malcolm Turnbull and his government are headed for a showdown with highly influential broadcaster Alan Jones amid

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Australia Institute: Keep cheap gas here

Cross-posted from Australia Institute: Australia has plenty of cheap gas. The problem is private companies are selling it all overseas, writes principal adviser at The Australia Institute Mark Ogge. Hard to believe, isn’t it? But it’s true: in the last decade, tens of thousands of square kilometers of Queensland farmland has been covered in gas fields.

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Break the gas cartel or pay!

Via the AFR: …prices could be higher based on the spot Asian LNG price for the first quarter next year, translating to at least $11 a gigajoule for a large manufacturer in Victoria, and even more for a smaller one, said Mark Samter, energy analyst at Credit Suisse. The analysts are among energy market watchers that

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Gas reservation spiking global LNG prices?

From the AFR today: Even now that Canberra has backed away from triggering the export controls, Tuesday’s deal is seen having a similar effect as Queensland’s exports of gas will be essentially limited to long-term contracts. Gas and petroleum exploration and the production, treatment and marketing of natural gas, crude oil, condensate, naphtha and liquid

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More signs of cheaper gas

Australian gas customers are moving in for the kill: The recent renegotiation of the Gorgon contract between India’s Petronet LNG (PLL) and Mobil Australia Resource Company is bound to open more doors for similar deals, credit rating agency ICRA said. It said that akin to PLL, Gail is also is trying to renegotiate such contracts

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Is Do-nothing Malcolm about to become a gas trader?

Via The New Daily: Australia’s gas producers are pushing the government to guarantee the purchase of gas in the domestic market, in a proposal that could cost taxpayers tens of millions of dollars. On Wednesday, Prime Minister Malcolm Turnbull revealed he had cut a deal with Australia’s three biggest gas producers – Origin, Santos and Shell – that would solve

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Gas cartel, One Nation threaten to leave gas in the ground

Via the AFR: The heads of the Queensland LNG ventures headed up by Origin Energy, Shell and Santos have been summoned to meet again with Mr Turnbull in Sydney on Wednesday morning, when they are expected to come under pressure to commit to only shipping gas that is covered under long-term sales contracts. That should

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Is the oil breakout real this time?

Via the FT: Brent crude oil rose above $58 a barrel on Monday to its highest in more than two years, lifted by fast-growing demand and a threat to Iraqi Kurdistan’s crude exports as the autonomous region holds a referendum on independence. BP’s top oil trader in Asia said the crude market had turned a

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ACCC to fix wholesale gas prices?

After completing stuffing its regulatory response to the gas market for several years, by resisting reservation and allowing reserves to consolidate in a blood-thirsty cartel, the ACCC seems finally to be getting ahead of things: The national competition watchdog has taken the extraordinary step of releasing “appropriate benchmark prices” for natural gas on the east coast,

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Do-nothing Malcolm poofs around with gas cartel

Via Domainfax: The Turnbull government has given the east coast gas giants one last chance to free up enough fuel for the domestic market or be hit with export controls, after two new reports showed the predicted shortfall to be three times worse than originally thought. And the government will redouble efforts to convince NSW, Victoria and the Northern

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Time to upgrade oil prices?

Morgan Stanley thinks so: Product markets are showing signs of outright tightness, particularly middle distillates. This is feeding into crude markets which are looking more balanced in 2018. We are raising oil price forecasts modestly. The real winners though are refiners, and we see value in margins and crack spreads. Strong demand is driving product

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Do-nothing Malcolm pulls gas reservation lever

Via the AFR: Malcolm Turnbull has indicated the government will pull the trigger to enforce limits on east coast gas exports and try to direct more to domestic supply, prompting howls of protest from the LNG giants and warnings about sovereign risk. A day after Australian Competition and Consumer Commission chairman Rod Sims warned the government

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CEO “laughed out of Canberra” for forecasting gas crisis

Via the AFR: The managing director of Australia’s biggest brick making company says if a company was ever run as badly as Australia has been in the past 10 years by its politicians, the entire board would step down. Lindsay Partridge was fuming on Thursday as he revealed that Brickworks manufacturing plants were facing a

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Is oil rebalanced at last?

Citi says so:  Oil markets are persistently misunderstanding this Friday’s meeting of the OPEC JMMC in Vienna, confusing it with an OPEC ministerial meeting and expecting decisions related to whether the producer group plus Russia and other non-OPEC countries will extend and/or deepen their output cuts. Little could be further from reality. The producers

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ACCC shames gas pensioner killers, backflips on reservation

The new gas narrative is given greater impetus today by the ACCC: Australian factories are at risk of shutting down and sacking workers as the nation’s gas exporters starve local customers in favour of overseas clients, according to a dire warning from the competition watchdog that clears the way for a gas crackdown. The Australian