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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Some taxes for the gas cartel!

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

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Japan breaks LNG deals so Straya can import its own gas!

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,

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Fossil fuels just love Mike Cannon-Brookes

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

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Limits to LNG prices

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

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Labor to revive hideous NEG

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

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LNG imports must be stopped at all costs

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

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Australia’s bowel-shakingly awful energy scab grab

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

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Can WA gas save the east coast?

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

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Sack Sims to fix gas

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

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The amusing life cycle of a Victorian gas molecule

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

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Finally, Canada scores its LNG pay day

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

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Australia’s energy suicide is here

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

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What exactly is the new gas reservation agreement?

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

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North America the next LNG boom

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

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The fugly geopolitics of China’s LNG bribe

As I noted this morning, suddenly Australia is back in fashion in Beijing, via the AFR: Beijing has signalled it is willing to rebuild its relationship with Australia under the Morrison government, and says there is no conflict between the two nations in the South Pacific despite concerns about China’s growing influence in the region. The

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China aims LNG bribe at Australia

Suddenly Australia is back in fashion, via the AFR: Beijing has signalled it is willing to rebuild its relationship with Australia under the Morrison government, and says there is no conflict between the two nations in the South Pacific despite concerns about China’s growing influence in the region. The upbeat assessment of Australia’s relationship with