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
Both fiscal and monetary authorities are in a building panic about Aussie growth. They should be. We’ve been in per capita recession for nine months and it’s getting worse not better. So, as the mad scramble for tax, monetary and prudential stimulus intensifies, why is the Government overlooking energy prices? Treasurer Frydenberg told business where
The Asian gas spot price has now cratered to $6.90Gj. Based on the current Australian Domestic Gas Security Mechanism (ADGSM) that should have the domestic price at roughly $5Gj. The east coast gas crisis should be over. Instead the spot price is at $9.50Gj while the Government and ACCC do NOTHING to enforce their own agreement
Via The Australian comes a lonely Andrew Liveras: “It is a tragedy that manufacturing in Australia is being hit by high electricity prices when we have abundant energy. It is a situation which should be remedied as fast as possible.” Mr Liveris cited the potential of the Northern Territory’s Beetaloo Basin, some 500km southeast of
Via Matthew Stevens: The fate of Incitec Pivot’s gas-challenged Gibson Island urea plant near Brisbane looms as an early challenge for whomever our returning prime minister, Scott Morrison, gifts with the resources portfolio. …She called out that efforts to secure new gas supplies at a price low enough to re-secure the economics of the company’s
I’ve tried my hardest but have failed and the result us upon us, at the AFR: A gas price cut is required for Queensland’s Gibson Island fertiliser plant to avoid closure this year, with owner Incitec Pivot urging the re-elected Morrison Government to ensure gas was ”available and affordable” for Australian manufacturers. Uncertainty over the
Good job ABC’s The Business: The incoming Labor Government must immediately toughen the Australian Domestic Gas Security Mechanism (ADGSM) with a $6Gj price cap or export net back that includes LNG plant capital costs, whichever is lower. Create a new regulator to enforce it. Install “use it or lose it” laws to ensure no production
The AFR kicks us off: A decision by LNG powerhouse Qatar to abandon its long-held insistence on high prices will revolutionise the global business and pressure rival exporters who will struggle to lock in favourable tariffs, according to Fereidun Fesharaki, one of the world’s most respected LNG market insiders. But Qatar, already the world’s lowest-cost
Via Clyde Russell at Reuters: As part of its latest round of retaliatory tariffs on US imports, Beijing increased the duty on LNG shipments from 10 per cent to 25 per cent. …China imported 25 US LNG cargoes in the first half of 2018, and this slipped to just eight in the second half, according
Via Michael West: This reporter had not been barred from attending a public meeting in two decades of journalism but it finally happened. Michael Westreports on the sneaky push to exempt a Chinese-owned tax avoider from the National Gas Rules and foist a $2.7 billion cost onto Australian gas customers while opening up vast new tracts
More cult of CEO clap trap today from the AFR: When Brett Redman met Philip Graham, then at Citigroup, for a beer at a North Sydney pub in late 2011, the merchant banker wanted to work on AGL’s exit from the financially troubled Loy Yang brown coal plant in Victoria. But Redman, then AGL’s group
Via the AFR: NSW manufacturers say relying on LNG imports or gas from the Northern Territory to satisfy the state’s needs will send them out of business and have stepped up calls for the government to get behind Santos’s Narrabri coal seam gas venture, which secured two prospective customers this week. The NSW government’s support
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
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
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
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
Via The Guardian: The new Northern Australia Development Fund will provide $1bn to tourism projects and “up to $1.5bn” for a new gas pipeline to unlock gas in Queensland’s Galilee and Bowen basins and connect the Beetaloo basin to Darwin and the east coast. Labor said the policy would help Darwin export gas, while increasing
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
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
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,
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
Via Herald Sun: Baby Boomers, Millennials, mums and dads and every state and territory are united on one thing this election — cost of living is their number one issue. …After five years in power, the Coalition is likely to take a hit over cost of living issues given wage growth remains sluggish and households
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
Here is the future as the LNG glut takes shape in Asia, via Reuters: U.S. producers of liquefied natural gas (LNG) are wooing buyers with offers to sell gas priced against benchmarks other than U.S. domestic prices, ahead of an expected flood of supplies on global markets this year. …The United States, the world’s fastest
Via the AFR: Australia’s power grid is only coping with the rapid influx of intermittent wind and solar power with the help of costly daily intervention by the energy market operator to keep the lights on, an assessment of the electricity system has found, ramping up pressure for a long-term federal framework that integrates climate
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
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
Via The Australian: Bill Shorten will impose an aggressive pollution cap on industry and business if elected, in a bid to meet Labor’s ambitious climate change targets, and will push for half of all new cars sold in Australia to be electric within a decade. On the eve of the federal budget, the Opposition Leader
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
Check out this great news, via Reuters: Vitol Group’s head of liquefied natural gas trading said on Wednesday that the outlook was bleak for LNG in the short term due to an “incredibly” oversupplied market, which would lead to some output shutdowns. “We had record imports of LNG into Europe. Three years ago we saw
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
