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

11

Time to bully Santos not AGL

The MB line on the energy crisis is now official.  Via The Australian through gritted teeth: The use of high-cost gas for electricity generation has almost doubled in two years, producing a perfect storm for household bills of record gas prices and a growing reliance on it to fill the energy gaps as coal plants come off

32

Mirabile dictu: The gas solution rides in

Via The Australian through gritted teeth: The use of high-cost gas for electricity generation has almost doubled in two years, producing a perfect storm for household bills of record gas prices and a growing reliance on it to fill the energy gaps as coal plants come off line. The Australian understands that modelling provided to

5

Do-nothing Malcolm fails with markets

Phil Coorey had an interesting piece on the weekend about Do-nothing Malcolm’s attempts to be popular: …on Monday, AGL boss Andy Vesey found himself being chased by the media though Canberra airport and into Parliament House like a common criminal, to be subjected to a public show trial by the Prime Minister and Energy Minister over why

22

Energy chaos spins out of control

It’s getting worse not better as Do-nothing Malcolm’s political barstardry leads the nation down the energy rabbit hole. From the AFR: AGL Energy has moved to avert any push from Canberra to break up the company amid speculation that an expected attack by the competition watchdog on anti-competitive electricity supply will be seized on by

21

AEMO: We must shut 10 Liddells

Via the AFR: Coal-fired generation equal to 10 Liddell power stations will have to be closed by 2036 for Australia to meet its Paris climate agreement pledge, the Australian Energy Market Operator says. AEMO’s network development plan released last December said that for Australia to meet the pledge the Turnbull government made at the Paris climate talks in

1

QLD gas drips south

Via UBS: Domestic market accepts diverted Qld LNG gas; GLNG the surprise player Our June 2017 research note on east coast gas concluded that there would be no physical gas shortage, just a shortage of cheap gas, as Queensland LNG projects divert more gas into the domestic market. Since June we have seen this thesis

36

Do-nothing Malcolm’s sovereign risk shocker

Via The Australian: Bill Shorten asks the same question, hoping repetition will prove effective. “How much of power bills for Australia has gone up since the Liberals formed government in 2013?” Malcolm Turnbull admits power prices have gone up since the Coalition won power, much to the delight of opposition MPs. “They came down significantly

56

As Coalition hearts coal, solar prices crater

As the Coalition hearts coal today, the US National Renewable Energy Lab (NREL) has released staggering new cost profiles for US utility scale solar: Solar PV capex cost cratered 29% year on year to a levelised cost of electricity of $0.43kWh. This is way faster than we have previously estimated was possible: Utility solar +

19

Why AGL does not want to sell Liddell

Via Credit Suisse: AGL’s 90-day commitment no different to prior voluntary commitment, now more politicised: following a meeting with the Federal government, AGL has committed to revert in 90 days with an alternate plan to the Government’s preference of keeping Liddell operating beyond its 2022 end of life. We note that AGL had already committed

20

As India forces Aussie gas discounts, our price rises 600%

As do-nothing Malcolm and his loser mates attack renewables and champion coal, the real culprit, gas prices, being forced to discount because it has flooded regional markets, via Goldman: It has been suggested in the press that Petronet may have successfully renegotiated terms with ExxonMobil relating to its c.1.5mtpa 20-year contract with the Australian Gorgon

0

Slowly but surely, oil is rebalancing

Via Citi:  The market is still digesting the potential impact of Hurricane’s Harvey, Irma and Katia on oil balances but focus is likely to soon turn to the IEA’s September OMR that is published this Wednesday. The Paris-based agency’s August report caused a stir given the sizeable downward revisions to its headline oil demand

38

Do-nothing Malcolm bullies AGL into permanent high energy prices

My God, this nation has become a walking idiot. Here’s what Do-nothing Malcolm has secured for the future of energy security to lower prices, via cock-a-hoop Australian: Malcolm Turnbull has struck a deal with power giant AGL to prevent a looming energy shortage by extending the life of a vital coal-fired power station for five

0

Big Sleazy catches a bid as Big Iron fails break out

Dalian is trying repair overnight damage today: Big Iron is down sharply. BHP and RIO failed at largish double tops, at least for now… Big Gas is soft but the pensioner abuse specialists continue their predictable but appalling re-rating: Big Gold is off sharply. I remain a seller short term: Big Sleazy has caught a

28

Coalition flunkies enter energy “loony fog”

The AFR hasn’t done too bad a job on energy. Ben Potter finally converted to energy transformation in recent years and Angela Macdonald-Smith has, at times, described the great gas gouge. But it sure ain’t coming from the top, via Michael Stutchbury’s note on the weekend: Coal is Turnbull’s new black. Wages the economic growth

1

More Santos gas shifts to domestic markets

Via the AFR: Santos and Origin have inked a new deal to supply Chinese-controlled plastics maker Qenos with ethane until the end of 2019. Santos announced in November 2014 that it has signed a new five-year deal to supply ethane gas to Qenos in NSW. At the time, the deal was heralded as avoiding the potential loss of more

16

Culture war on AGL continues

Question: what relevance does this have? From The Australian: The head of government relations with energy giant AGL is a graduate of Al Gore’s climate-change leadership program whose move to the corporate world last year follows a quest to “change the system from within”. Tony Chappel is part of AGL’s executive team responsible for engaging

25

Gas to kill pensioners this summer

Via the AFR: Santos and its GLNG project partners have taken their most decisive step yet to head off damaging caps on gas exports, agreeing to divert 30 petajoules of gas away from export and into the domestic east coast market. The move comes as the federal government is due this month to decide whether to declare

42

Coalition energy crisis explodes

Reap the whirlwind. The Coalition’s self-made energy crisis has finally exploded. From the top, mining is furious: The chief executive officer of miner Rio Tinto has lashed out at Australia over its rising energy costs, saying the country had kicked “a national own goal” letting states set their own energy targets and make their own gas access

6

Big Sleazy breaks to new lows

Dalian is trying to rebound: BHP is still nudging breakout: Big Gas continues its re-rating with exporters down and the domestic gougers flying: All I can say to that is, what a pack of bloody idiots we are. Big Gold is powering, working beautifully as portfolio insurance. I’m still a seller here for the short

65

FIX GAS YOU IDIOTS

Via The Australian: The government has been warned of a looming gap in the national electricity supply as coal-fired power stations shut down, highlighting the need for urgent decisions to build new generators that operate around the clock. …The government is shifting its focus to the reliability of new ­energy generators, as well as the

6

There is only ONE energy fix

Via the AFR comes five solutions: One priority is to ensure the existing coal fleet which will supply the bulk of our power for a decade or more as we continue the transition to clean power is as efficient and reliable as it can be…Engineers at GE – a traditional power engineering giant now heavily