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

4

AGL demands VIC approve poisonous LNG import terminal

Via The Guardian: The gas company AGL asked the Victorian government to change a wastewater policy that could be used to block the proposed Crib Point gas import terminal. AGL made the request in a public submission on a draft environmental regulation. The company wants to build a 290 metre-long floating storage and regasification unit

3

Origin steals record loot from everyone

Via ORG today: So, ORG sent record volumes of Aussie gas offshore without paying any tax on it, in the process creating an artificial gas shortage at home which it exploited via higher electricity prices (remembering that gas sets the marginal price of electricity) for its portfolio of coal, gas and renewable power stations. That this

9

NSW signs up to energy suicide pact

Via Bloomie: The world’s biggest oil exporter is ramping up efforts to develop natural gas with plans for a 15-fold boost in output from unconventional deposits of the fuel. …“We are looking to take our unconventional gas within the next 10 years to 3 billion standard cubic feet a day of sales gas,” Nasser said

1

No, a new LNG boom is not coming to Australia

Via Domain: Energy forecasters have tipped a $US200 billion global LNG surge with Australia’s exports forecast to reach $49 billion in value in 2019-20, overtaking Qatar as the world’s largest LNG exporter. Total industry capital expenditure is expected to reach more than $US200 billion ($285 billion) between 2019 and 2025. Much of it is likely

10

US approves enormous new LNG projects

It’s something to behold, via Bloomie: Tellurian Inc.’s proposed $28 billion Driftwood terminal in Louisiana and Sempra Energy’s Port Arthur LNG project in Texas were cleared by the Federal Energy Regulatory Commission in a 3-1 vote in Washington, with Democratic Commissioner Richard Glick dissenting. The approvals followed a breakthrough at the commission, which had been

4

Manufacturers go after gas cartel

Via the AFR comes Australian manufacturing: The federal government should create a public gas company to drive investment in new supply, say major energy users who warn urgent intervention is needed to avert plant shutdowns and mass job losses. …A “Commonwealth Gas Co” could support the development of new gas pipelines and a gas import

21

How the Coalition killed itself with Enron politics

Via The Guardian: A poll commissioned by the activist group GetUp, which is targeting the seat, found that 64% of Kooyong residents said they would be more likely to vote for a candidate with a plan to address climate change by replacing coal with clean energy. However, a survey by Roy Morgan, published in the Australian Financial Review,

3

Great gas cartel robbery continues unmolested

From Oil Price: China is set to import massive amounts of LNG in 2019 as part of its determined push to switch away from coal and toward the lower emissions natural gas, but this robust demand is unlikely to curb the current inventory glut in Asia, according to Reuters, citing Fereidun Fesharaki, chairman of energy

41

Gas cartel will destroy EV rollout

Via The Australian: Energy Networks Australia warned in a submission to the Senate’s recent electric vehicle inquiry that growing numbers of EVs, combined with the nation’s flat energy pricing structure, could worsen energy peaks and exceed the capacity of low-voltage networks. “Australia’s distribution networks were not designed for any significant uptake of electric ­vehicles and

15

AEMO declares 2023 gas shortage as cartel pillages right now

God save me from the AEMO: The Australian Energy Market Operator’s (AEMO) latest analysis finds that supply from existing and committed gas developments is expected to provide sufficient resources to meet demand in southern and south-eastern Australia until 2023. However, additional sources of gas supply are required to address a forecast gap in meeting long-term

27

How to end the carbon wars overnight

Via the AFR: The centrepiece of Labor’s plan to reduce carbon emissions – a baseline and credit scheme for the nation’s top 250 emitters – appears doomed with the Coalition opposed to the entire policy and the Greens hostile towards several elements, including letting companies offset emissions by buying international carbon permits. If Labor wins

25

Frydenberg pays $300m to subsidise gas cartel’s $20bn theft

Nobody but MB readers seem to understand the level of insult for Australians Treasurer Josh Frydenberg is readying in the Budget: Josh Frydenberg says he will deliver a responsible budget on Tuesday, after announcing the government will deliver cheques to four million welfare recipients to help pay their energy bills. The Treasurer said now was

8

God condemns gas cartel to Hell

It seems there are sensible economists in Heaven, via AFR: The Uniting Church in Australia has lined up against powerful gas producers, telling the federal government that proposed changes to the petroleum taxation regime are far too generous and leave the community shouldering part of the risk for poorly conceived exploration programs. …the Synod of

3

NSW Labor’s idiotic stance on gas

Via the AFR: NSW Labor says it does not believe assurances from Santos that all gas from its proposed Narrabri gas project would be sold to local industry, rather than exported, doubling down on its pre-election declaration that the $3 billion development is ‘dead’. Defying the Australian Workers Union support for the project to reduce

6

Gas cartel rorts ACCC

The ACCC was out with its LNG net-back price yesterday: It’s calculations for net back are higher than mine largely because of this: For a given measure of Gladstone FOB prices in A$/GJ, the next step in the calculation of netback prices is to deduct LNG plant costs. For this, the ACCC has used estimates

9

Will Australia allow Shell to eat it?

Because that is its plan. The ACCC confirmed yesterday that the gas cartel is still taking the major piss, via The Australian: Gas prices on Australia’s east coast are set to fall this winter, potentially providing some relief to long-suffering manufacturers and heavy industry, according to data from the competition watchdog. Domestic gas prices may

30

No choice: Labor crushes gas price or is stillborn

The reason why is obvious at The Australian: Coal-fired power generation would fall by 60 per cent within the next decade to meet Labor’s 45 per cent emissions-reduction target, leading to the likely closure of more than half the existing east coast plants, according to ­independent expert modelling. The closures would bring an end to

7

Australia’s LNG disaster delivers final, monstrous insult

Examine this chart of Australia’s export performance from yesterday: Coal and iron ore have delivered new export revenue booms. However, the most spectacular surge is the takeoff in LNG volumes, which is now mostly complete. This is one reason why the Australian dollar is not as low as it should be. The commodities driven trade surplus has

0

Gas cartel pumps more hot air

Via the AFR: Historical prices for gas would not even cover the cost of production now, said Johanna Boothey, commercial head of ExxonMobil Australia, which spent $120 million on a fruitless two-well search for new gas in the Bass Strait last year and recently completed a $5.5 billion investment in a new gas development. …Cooper

12

“Coal to Newcastle”. Aussie LNG import madness exposed

Via Reuters: Five LNG import projects are vying to start up between 2021 and 2022, possibly forcing gas users in New South Wales, South Australia, Tasmania and Victoria into more direct competition with Asian buyers for gas from northern Australia. Those states represent a yearly market of 420 petajoules (PJ), equivalent to 7.8 million tonnes