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

10

Strayan energy costs highest of all

Via The Australian: Australia should focus on lowering energy costs rather than guaranteeing reliability, Australian Competition & Consumer Commission chairman Rod Sims said yesterday, as he declared high ­energy prices to be the biggest crisis facing the nation. Mr Sims said Australia should not “overdo” its focus on ensuring the reliability of energy supply, because

2

Gas cartel to muscle in on retail energy

Via the AFR: Global energy giant Royal Dutch Shell is considering a move to break into Australia’s domestic retail energy market to take on the established players of Origin Energy, AGL Energy and EnergyAustralia in what could be the biggest shake-up of the energy market in decades. …”We see real opportunities to disrupt existing market

3

ACCC warns on Do-nothing energy guarantee

Via the AFR: Australian Competition and Consumer Commission chairman Rod Sims has warned the Turnbull government’s National Energy Guarantee could stifle competition in the energy sector or push up prices for businesses and consumers if it was not properly designed. While the Energy Security Board said competition issues could not be given further consideration until

5

Oil to crash again?

So says Rystad Energy: “Shale is not dead, shale is reborn and has strong growth potential [even] at $US40 to $US50 oil,” said chief executive Jarand Rystad at the opening of the firm’s Sydney office. “It has the potential to again crush the oil market.” Rystad, one of the few to correctly forecast that US

1

Can China save LNG?

I am yet to meet an oil and gas bear. BofAML is typical: More projects likely to get off the ground this year We view the prospects for the US liquefied natural gas (LNG) sector as largely positive. We expect a number of final investment decisions (FIDs) this year as we move closer to meeting

19

LNG ripping Australia off $90bn in taxes

Via Domainfax: An Oxford University expert says Australia would be $90 billion better off if it adopted European-style resource tax policies and argues the Turnbull government has given up on collecting a meaningful amount of revenue from some of its most valuable resources. In one of a suite of new submissions to a Senate inquiry, Oxford

8

Do-nothing Energy Guarantee hosed again

Via the AFR: Australia’s largest energy companies have warned there are serious flaws in the Turnbull government’s National Energy Guarantee which needs to be overhauled before it is signed off by state and territory ministers next month. With federal Energy Minister Josh Frydenberg pushing to deliver the NEG as one of the Coalition’s key political

9

Energy futures fall as renewables flood in

Via Ben Potter at the AFR: A flood of new clean power and a summer without major outages is increasing confidence in the power system and helping to reduce prices, Meridian Australia chief executive Ed McManus said. “The price we can get the energy from those wind and solar farms is cheaper than the energy

16

How oil will save the US/China relationship

From the IEA overnight: Oil production growth from the United States, Brazil, Canada and Norway can keep the world well supplied, more than meeting global oil demand growth through 2020, but more investment will be needed to boost output after that, according to the International Energy Agency’s latest annual report on oil markets. Over the

9

Even less gas for the LNG white elephants

Via The Australian: Gas buyers and sellers have cast doubt on the ability of Queensland’s vast coal seam gas fields to supply coming export and domestic demand in the wake of Origin Energy’s downgrade of reserves at its Ironbark coal seam gas project. EnergyAustralia energy boss Mark Collette said the fields, which underpinned development of

3

Oil rally sent back to woodshed by US shale

Told you so. Here’s the oil price: I reckon we’re going lower and have probably seen the peak for the cycle as well (barring geopolitics). Why? The indomitable US shale. It is pumping like mad with more to come: US oil stocks are stabilising, via John Kemp: And get this, via Bloomberg: Encana Corp.’s RAB Davidson

32

At last: Straya to invest in gas fix…in Asia…OMG

This dill has no idea what he is doing: Australia has struck a high-level agreement with the US government to promote more Asian gas import receiving infrastructure and open markets as both nations expand competing liquid natural gas exports. The deal was revealed today by Federal Resources Minister Matt Canavan, who said it had been

11

Should we pipe gas from the West?

The always useful Andrew Liveras is back: Top US-based executive Andrew Liveris has told America’s corporate bosses and Australian political leaders that paralysis over energy policy was a key deterrent to foreign investment in Australia. During a private session last weekend in Washington, DC, involving leading US chief executives, visiting state and territory leaders and

4

LNG imports won’t fix jack

Via the AFR: The project, backed by the world’s biggest LNG buyer, JERA of Japan, is a rival to the LNG import project proposed by AGL Energy for Crib Point in Victoria, and would start about a year earlier under the current schedules. Gas from the AIE project would be priced at between $8 and $10 a gigajoule,

14

The energy disaster embeds

Via The Australian: Malcolm Turnbull’s gas export restriction threats have been ­unable to counter the impact of rising oil and Asian gas prices, with average Sydney and Melbourne wholesale prices jumping 40 per cent last year and January’s prices in both cities the highest on record for that month. While the government intervention and extra

8

Nothing Energy Guarantee unravels

Yes, he’s done it again, at the AFR is Ben Potter: Is the National Energy Guarantee really the best chance we have of – at long last – ending 15 years of incompetence and political infighting in energy and climate policy making? Or is the NEG a face-saving fig leaf to cover for the Turnbull

17

Great news: Korea declares war on Woodside

Via Reuters: South Korea’s Korea Gas Corp has entered court-administered arbitration with Australian joint venture North West Shelf Gas seeking to settle a dispute over a liquefied natural gas (LNG) contract that expired in 2016. A spokesman for the state-run Korean firm, known as KOGAS, confirmed an arbitration process was under way but declined to

2

Oil heads for new glut as history repeats

From the new IEA OMR: This month’s OMR is abbreviated to allow time for us to complete our annual five-year outlook that will be published in our report Oil 2018 on 5 March. Meanwhile, new and revised data shows a modest tightening of the balance in the early part of 2018, but the main message remains unchanged

3

The greatest gas shock is yet to come

But we’re getting a little taste of it now, via AFR: The unexpectedly tight liquefied natural gas market in Asia is complicating Australian regulatory efforts to prioritise the domestic market for east coast gas, helping drive up local prices for the fuel in January despite soft demand. Imports of LNG by Japan, the world’s biggest

4

US shale smashes Saudi aside

Bang! Here it is: More from John Kemp: U.S. crude oil production is set to increase by more than 1.2 million barrels per day in 2018 compared with 2017, according to the latest short-term forecasts from the U.S. Energy Information Administration. U.S. crude production will average almost 10.6 million barrels per day (bpd) this year

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SA battery already undermining gas cartel

Via Reneweconomy: On Sunday, January 14, something very unusual happened. The Australian Energy Market Operator called – as it often does – for generators in South Australia to provide a modest amount of network services known as FCAS (frequency control and ancillary services). This time, though, the market price did NOT go into orbit, and