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 AFR: Labor says the certainty created by having an energy policy and the falling cost of renewable energy means emissions can be cut and prices lowered at the same time. Speaking ahead of the launch of Labor’s energy policy on Thursday, shadow climate change and energy minster Mark Butler said asking people to
It’s all so horribly predictable. Via the AFR: After announcing that the world has arrived at a “new era for energy”, Coleman asked: “Where is the vision from our leaders today?” …”as renewables achieve scale, we risk wasting money on building more power into the system, resulting in generation overload. We risk ending up in
Via Westpac: Chinese steel, iron ore and coal Chinese environmental policies have boosted the demand for higher grades of iron ore but in the long run they may drive a structural shift in demand. Chinese mills are increasingly using scrap steel as its supply grows with more buildings being torn down, more cars crushed and
And we thought our LNG boom was big. Via Reuters: U.S. liquefied natural gas company Tellurian Inc said on Wednesday it expects to start construction on its Driftwood LNG export terminal in Louisiana in the first half of 2019 and begin operations in 2023. Chief Executive Meg Gentle said in the company’s third-quarter earnings that
Yay! Love it. MB argued that when Shell bought QCLNG two years ago, the ACCC should have forced it to divest Arrow. It is the last big, undeveloped gas field on the east coast without community restrictions: Instead, the ACCC let the consolidation complete the export cartel. Now all of the Arrow gas is going to
A moderate victory over the gas cartel at Domainfax: Oil and gas giants will be hit with a $6 billion tax hike over the next decade following years of concern that Australia has been hemorrhaging lucrative revenue to multinationals. The decision was made after an 18-month wait for the Coalition’s response to a landmark review into
This might be hard for you to believe. As we know, President Donald Trump does not believe in climate change. Indeed, he professes a love for coal and delivers policy in support of it. The US has trashed multilateral climate change agreements over and again while Australia has supported them. To the Fake Left the
Exciting news via Platts: On October 22, Japan’s Ministry of Economy, Trade and Industry unveiled a model clause that can be used by LNG buyers to remove destination restrictions from long-term contracts. Such restrictions have become more relaxed in renegotiations of LNG contracts or in new contracts among market players, Hiroshige Seko, minister of economy,
Via AFR: Mike Cannon-Brookes’ campaign to reclaim the phrase “fair dinkum power” from Prime Minister Scott Morrison has been swamped with offers of support, and the Atlassian billionaire is in the process of registering a trademark for a logo to promote renewable energy. Mr Cannon-Brookes said he had had hundreds of tweets and emails expressing
The Oxford Institute for Energy Studies has an in-depth piece out on the cost of LNG plants, looking in detail at the drop in LNG construction costs and how maintainable the falls are in construction costs: As you can see, the Australian plants dominate the top of the cost table, with many of the more recent plants
I know this bloke means well but having $6bn does not make you expert on everything, via Twitter: ⚡ Argh! Bullshit mate 😡 @ScottMorrisonMP you’ve made me mad & inspired me. We need a movement. We need a brand for Australia’s energy future. We need a rallying cry for Australians who believe in ☀️ 🌬️
Not everything about the gas cartel is bad. It is an effective and massive private carbon tax and that has predictable results, via the ABC: Andy McCarthy has been installing rooftop solar panels in Victoria for 18 years, but even he is stunned by the massive recent growth in demand. “It’s been crazy,” he said.
Via The Australian: Labor will take the National Energy Guarantee — devised by Malcolm Turnbull and Josh Frydenberg — to the next election as its preferred mechanism for reducing emissions. It will scale up the target in the NEG to meet its goal of reducing emissions by 45 per cent. Opposition environment spokesman Mark Butler
Via the AFR: Labor will side with business and oppose the government granting itself powers to force the divestment of energy companies, arguing it is an ad hoc move which would have no impact on power prices and only serve as an investment risk. The Coalition is divided on the so-called “big stick” powers with
Via the AFR today: From the start, the structure of the ADGSM, with its annual decision on whether to curb LNG exports, was seen as vulnerable to “gaming” by gas buyers as they sought to access lower prices. Last September industry sources and analysts said some commercial buyers were deliberately holding off from signing new
From Renegade Economist comes the fantastic Bruce Robertson (IEEFA) on how Australia destroyed its own energy markets: We discuss policies to reduce gas prices as per international best practice. In light of further consolidation in the industry, we discuss how gas sets the baseline price for energy production in the nation. How much could energy
Hope is kindled: Welcome aboard, Rod. This will aid Labor to tackle the gas cartel when it takes power. It must do it first and foremost or as falling house prices drag down the AUD then we’ll see a new gas and electricity price shock smash into the economy. It will be made even worse
The AFR continues its energy jihad against all Australians today: East coast gas buyers have resigned themselves to the prospect of paying around $10 a gigajoule for gas, even with Labor’s gas plan signalling lower prices, said Cooper Energy chief executive David Maxwell. “There no doubt that the mood has changed a lot in the last six
The AFR ran some more interesting stuff over weekend, this time from former Credit Suisse analyst Mark Samter: “I think Bill Shorten should be held to account for his comments and to explain to the gas market, and to gas buyers because he has left it, I would argue deliberately opaque so that unions and
The AFR offers a useful debate about gas today, though is draws all the wrong conclusions as usual. Its editorial sets the tone under the title “Solution to energy crisis should fall back on the market”: Rather than heavy-handed resource intervention, the best response is to encourage more domestic supply. That means peeling back the
The scab grab in Aussie energy today is quite simply a bloody disgrace. The AFR leads off the farce: The nation’s energy companies and biggest electricity users have given up on politics and begun backroom talks about a self-regulated package of measures to reduce greenhouse gas emissions, restore energy reliability and improve investor stability. They
More warnings today from industry, via The Australian: The Australian Industry Group, which represents 60,000 manufacturing and industrial businesses, said the expected rise of gas prices on the east coast this summer back to near crisis levels threatens to dent the economy and reflects the government’s failure to sanction sound energy policies. Ai Group chief
There is a point at which recalcitrance becomes retardation and the ACCC has well and truly passed it on gas, via the AFR this morning: Competition czar Rod Sims singles out the two key culprits: overbuilding of LNG export capacity in Gladstone, and restrictions on onshore gas in NSW and Victoria that killed off new
The Australian energy crisis is the circus that just keeps on giving, via The Age: “It’s an inevitability that Australia will import gas, there needs to be at least one gas import terminal in Australia, if not potentially two,” Macquarie Bank analyst Andrew Hodge told Fairfax Media. …However, he said the terminals were unlikely to
Australia’s slow motion prognosticators are waking up to the new energy crisis. At the AFR is Jenifer Hewitt: Faced with the Turnbull government’s demands for change, the big market players promised to ensure adequate supply for domestic needs. At what price is far more complicated. …To help clarify matters, the ACCC is now publishing an
Via Reuters: A massive liquefied natural gas (LNG) export project in Canada has been given the final go-ahead by project partners, LNG Canada said on Tuesday, making it the first major new project for the fuel to win approval in recent years. First gas from the project is expected before 2025, aiming to feed an
And so it begins, or resumes, via Domainfax comes the catastrophic ACCC: Mr Sims said the information would allow manufacturers to get better gas contract prices. “Domestic gas buyers clearly should not have to pay more for gas produced in Australia than the overseas buyers. The publication of LNG ‘netback’ prices on our website will
Via the AFR: East coast manufacturers can expect little relief from high gas prices with the extension of a deal between the federal government and Queensland’s LNG exporters on local gas supply, as the tight global market for LNG puts renewed pressure on domestic prices. The agreement between the Queensland LNG exporters and the Prime
Is Australia entering a new energy shock? There are two reasons why it might be. First, US gas reserves are their lowest since 2003, via John Kemp: From Barrons: Natural gas prices could spike this winter if there is a severe cold snap. Gas stockpiles are expected to end the month of October at 3,330
Via Bloomie: The next LNG investment cycle may be primed for a liftoff. Royal Dutch Shell Plc and its partners are set to announce a final investment decision on their C$40 billion ($31 billion) liquefied natural gas terminal in western Canada as early as next week, Bloomberg reported Wednesday. This would be the first FID
