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
As predictable as the sun, via The Australian: Queensland’s three big gas export plants are shipping at their strongest rates in seven months as global LNG prices rise to four-year highs and southern winter demand pushed Sydney and Melbourne gas prices to records last month. The spike may inform talks gas producers and LNG exporters
Via Gottiboff comes Andrew Liveras: Liveris accepts as a given that Australia wants to reduce its emissions and to honour its gas exports contracts. If it doesn’t honour those contracts it will do great long-term harm to the nation. …Liveris plan starts with the requirement that New South Wales needs to exploit its gas and
Catherine Tanna that is, at the AFR: Competition czar Rod Sims has dismantled EnergyAustralia’s reasoning that the introduction of a default retail electricity tariff will mean higher prices for most of its customers, saying that the competitive market means those customers will still be able to get discounts as big as they do now by
From The Australian comes AGL: Australia’s largest power generator, AGL Energy, has warned Victoria faces gas shortages in the early 2020s as supplies from Queensland dry up, with the problem to be made worse should Labor introduce a price trigger to limit export volumes and free up domestic supplies. …“As we move into the 2020s,
Here it is from the ACCC: Importantly, the ACCC isolated gas prices as a very particular influencer of power bills. “Another major factor in wholesale prices has been the significant shortages in competitively priced gas at a time when gas-powered generation would often be the logical source of replacement for lost coal-fired capacity. Gas prices
The campaign against gas reservation has begun at the AFR. Santos CEO Kevin Gallagher: …Australia relies on foreign investment, but sovereign risk is rising fast. In a low-risk country, governments recognise that contracts between commercial parties must be honoured and not broken by governments favouring one party over another. In a low-risk country, governments do
At The Conversation we find joyful (24 hours late for you guys): Bill Shorten will turn the energy spotlight onto gas on Monday, proposing measures Labor says will put downward pressure on prices for manufacturers and power generators and so benefit jobs and households. A Labor government would introduce a permanent gas export control trigger
Can it be that at the cost of the east coast energy shock and one prime minister the gas cartel’s time has finally come? Via the AFR: Senior executives from Santos, Origin Energy and Shell are set to be summoned to a meeting with federal Resources Minister Matt Canavan within two weeks ahead of a
At The Australian PM Morrison’s new energy man, Angus Taylor, speaks: “I’m focused on getting prices down while I keep the lights on. I’ve got one KPI. I’ve got one goal,” he told The Australian. …The key points of the new Morrison-Taylor plan were flagged by Mr Turnbull last week after the collapse of the
From Gottiboff: What I want to see from Angus Taylor is the truth and the whole truth. A series of state politicians, led by those in New South Wales, Victoria and South Australia, set themselves high renewable targets and began subsidising vast investment in wind and solar farms, as well as other renewable projects, including
Via the ABC: Malcolm Turnbull’s son has lashed out at vested interests in the Queensland coal mining industry, who he says are exerting undue influence over the Liberal Party’s energy policy. Alex Turnbull, who describes himself as a keen environmentalist, studied economics at Harvard and runs a private hedge fund in Singapore. Before leaving Australia
Via Matthew Stevens at the AFR today: Why is NSW like Lithuania? Well, according to a bunch of clever Norwegians, it is because the Baltic nation and Australian state share similar sources and solutions to their individual energy challenges. The Norwegians in question work for Hoegh, the world’s leading provider of floating liquid natural gas
Finally somebody talking sense on energy and gas. And it wasn’t the other bloke.
As a PM, if you let your country get eaten alive by rent-seekers’ devouring the fundamentals of your civilisation then you deserve everything that you get. This is the sad and sorry truth now confronting Australia’s worst ever PM, Malcolm Bligh Turnbull. The Turnbull Government has been staggeringly slow to recognise the wreckage of the energy
Has a political party ever torn itself apart so spectacularly as the Coalition on energy? The AFR says the NEG will pass the party room: The Coalition party room is expected to endorse the National Energy Guarantee on Tuesday despite last ditch efforts by former prime minister Tony Abbott and former Nationals leader Barnaby Joyce to torpedo the policy.
Super news, Aussie gas suppliers have been trumped again by US, via Reuters: U.S. liquefied natural gas (LNG) company Cheniere Energy Inc said on Friday it had signed a 25-year deal to supply Taiwan’s CPC Corp, which CPC valued at roughly $25 billion. Cheniere said it will sell 2 million tonnes of LNG per year
The BBC has it: It may sound like the title of a low budget sci-fi movie, but for planetary scientists, “Hothouse Earth” is a deadly serious concept. Researchers believe we could soon cross a threshold leading to boiling hot temperatures and towering seas in the centuries to come. Even if countries succeed in meeting their
By Leith van Onselen The AFR View has delivered Australia more gas propaganda: …the world of cheap domestic energy advantage that existed before Queensland joined the LNG export bonanza is not going to come back. The worst news is that all the things which might now improve matters further, or buffer Australia from new global
By Leith van Onselen From The Australian comes a fresh gas price warning from the Australian Competition and Consumer Commission (ACCC): “Gas production costs are increasing and gas prices in the east coast market are now shaped by international LNG prices, meaning that domestic prices are unlikely to return to historic levels,” ACCC chairman Rod
Via The Australian: Fresh gas shortages on Australia’s east coast could emerge from mid-2019 — two years sooner than official forecasts — due to a sharp decline in Victorian offshore gas production piling renewed pressure on domestic prices, a private firm fronted by former BHP executives has warned. Venice Energy, the Mitsubishi-backed venture that aims
Via the AFR: Shell’s groundbreaking Prelude floating LNG plant off Australia’s far northwest coast has gone “live” ahead of the start of production later this year, chief executive Ben van Beurden has confirmed. LNG and liquefied petroleum gas have both been introduced into the plant in preparation for commissioning and testing of processes and systems
God save us from the ACCC on energy, via the AFR: “Get ready for mass job losses,” Garbis Simonian, managing director of NSW gas user and wholesaler Weston Energy, said of prospects for gas prices to rise beyond the present level of about $10 a gigajoule, which is already straining many buyers. …”We certainly don’t
Via Michael West comes Bruce Robertson is a gas analyst with the Institute for Energy Economics and Financial Analysis (IEEFA): “Australia may soon be importing gas.” What a bizarre, implausible statement. Australia is the second largest exporter of gas in the world. Why would we ever import gas? Our very own Department of Industry, Innovation and Science ranked
Via the AFR: Only LNG imports can save the Australian government from a nightmare scenario of having to choose between breaking gas export contracts with Asian buyers or subjecting the east coast to real supply shortages, according to the respected energy analyst that sounded the alarm on the “slow train crash” looming in the market
Australia’s primary energy market wrecker, the Australian Competition and Constanza Commission, is talking big today: Investors in AGL Energy and Origin Energy are right to be worried about the prospects for their electricity retailing businesses, according to competition tsar Rod Sims, who is leading the regulator’s crackdown on the way the big three players treat their most
It’s all garbage: India’s renegotiated gas import deal with Russia’s Gazprom will save between Rs 8,500 crore and Rs 9,500 crore over the contract period ending 2040, Oil Minister Dharmendra Pradhan said today. State-owned gas utility GAIL India Ltd had in January taken advantage of the Russian company’s inability to deliver liquefied natural gas (LNG) from the
Via The Australian: “What has happened in the past may just look like a storm in a teacup compared to what is coming,” said Nicholas Browne, Wood Mackenzie director for Asia-Pacific gas and LNG. With supply shortages forecast for east Australia from the early to mid 2020s “gas will need to be diverted from LNG
From Bartho today: It is a measure of the complexity of the issues, the scale and number of the deficiencies and the difficulty of responding to them that the Australian Competition and Consumer Commission’s inquiry into energy affordability has come up with 56 recommendations. It is also a pointer to the convoluted nature of our
The ACCC is breathing fire, via The Australian: The competition watchdog has called for radical reform of the National Electricity Market to bring down prices, claiming the gouging of households and business consumers has reached an “unacceptable” level with widespread abuse of market power by the larger energy companies. Recommending the most significant shake-up of
There is nothing capitalism abhors more than an area of excess profitability. A demonstration of such is the superboom underway in east coast solar, charts via Domainfax: Whether public or private, carbon pricing works and the gas cartel delivered a doozy.
