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
Via the AFR: Santos’s proposed Narrabri gas project would turn the rich plains of the north-west NSW farming region into a “toxic dump”, Warrumbungle Shire Councillor Kodi Brady told the state’s Independent Planning Commission on Tuesday. It was the second of seven scheduled hearing days on Santos’ planning application for the $3.6 billion coal seam
Another writedown of the value of Australia’s worthless LNG export refrigerators today: More writedowns to come with those long-range forecasts still too high for oil and, as we go forward, crashed spot prices will overtake Brent benchmarks in Asia as well. By my calculations, that’s now roughly $4bn in writedowns for a $6bn investment, in
Via the AFR: Santos, the Australian Workers’ Union and the Narrabri local council have rejected a wall of environmental, farmer and activist opposition to a $3.6 billion gas project that promises to meet up to half NSW’s gas demand and help keep a lid on prices for manufacturers and households. Claims by the anti-coal-seam gas
It the post-truth world run by oligarchs, corporations can lie with impunity. There is no better example than gas cartelier Santos which has made fine art form of it. Previously from The Australian: As Santos worked toward approving its company-transforming Gladstone LNG project at the start of this decade, managing director David Knox made the
It’s maddening. At Domain: One in three tankers loaded with cargoes of Australian liquefied natural gas last month is either anchored at sea or taking a longer-than-usual journey to its destination as coronavirus prompts more buyers to delay deliveries. …In the latest sign of the increasing pain in the sector, new figures reveal the number
From cartel champion, The Australian: A gas deal between US energy major ConocoPhillips and junior explorer 3D Oil in Victoria’s offshore Otway Basin could help ease a forecast supply crunch set to hit the east coast by 2024. After selling an 80 per cent stake in the T49P permit in the Otway Basin to Conoco,
Via Bloomberg: Having successfully doubled crude prices over the past few months through unprecedented output cuts, the OPEC+ alliance led by the Saudis and Russia is poised to begin unwinding these stimulus measures. As fuel demand recovers with the lifting of coronavirus lockdowns, the producers are about to open the taps a little. …A second
Last week the International Gas Union issued its annual report on global gas prices. This is the industry benchmark report that the Australian gas cartel uses to argue in the Australian parliament that Aussie gas prices are reasonable. Here’s the 2019 results: Australia comes in at 18th around $8Gj. This makes domestic Aussie gas the
Rio is asking for bailouts as power prices are too high to make Aluminium, the price of which has fallen: The Australian Aluminium Council (AAC), whose members include Rio and US aluminium giant Alcoa, said energy costs had to come down for smelters to survive… It is understood the Coalition government and Rio have been
Here is the true “gas-led recovery”. At Domain: The head of the nation’s top commercial gas user, fertiliser maker Incitec Pivot, says a dramatic weakening in the global oil price outlook should pressure east-coast gas producers to offer much cheaper contracts. After oil giants BP and Royal Dutch Shell slashed their outlook for Brent oil
Via The Australian comes the sound of the door closing on cheap energy: Energy giant Shell said several of its high profile Australian gas projects were to blame for a massive $US8bn to $US9bn ($A11.7bn-$A13.2bn) writedown triggered by lower prices amid a Covid-19 demand shock. The energy major – one of Australia’s biggest gas producers
Via the ABC: The head of Australia’s consumer watchdog has slammed the gas industry, accusing it of misleading governments into approving massive gas export projects that have led to soaring power prices, killing off companies and jobs. “A lot of the things that Australian governments, politicians, were told when those projects went ahead, turned out
It’s all for bloody show, at The Australian: National COVID-19 Coordination Commission chairman Nev Power has pushed back on energy industry criticism of his $4 target for domestic gas prices, admitting the low price is a “stretch target” but saying it’s an achievable goal in the long term. “We’ve put out there some target of
This entire debate is de-anchored and now revolves around tiny, not to mention corrupt, numbers like this: Opponents of Santos’ $3.6 billion Narrabri gas project have attacked assertions from the company and the state government about its benefits for jobs and energy prices, pointing to analysis provided to the NSW government that found manufacturing jobs
God knows why the Morrison Government is so keen to support the gas cartel. It’s not grateful. Via The Australian: “When prices are being touted that are lower than the cost of getting it out of the ground, they are just not based in the reality of today,” Shell Australia chairman Tony Nunan told The
Yesterday saw energy boffin Graeme Bethune appear at the AFR to argue that there “is no market failure in Aussie gas”: So, is it true that higher gas prices have failed to promote new east coast supply? No. The Cooper Basin achieved the highest level of production in nearly a decade in the 2020 March
Truly we are living in an alternative universe now. The AFR is one of the chief authors of the fantasy: Santos will have to satisfy independent commissioners that have form in rejecting coal projects in NSW on the grounds of their long-lasting environmental impacts and strong community opposition to push ahead with what would be
With each new proposal, the far more sensible approach of gas reservations diminishes. This time Viva Energy: Interesting that Viva doesn’t even mention importing gas from other countries. Only “northern fields”. How can it possibly be cheaper to import gas from QLD via liquefaction, shipping and regasification instead of by one simple pipeline? When one
Via Domain: Australia’s lucrative exports of natural gas are being hit by a global supply glut and the coronavirus crisis destroying demand, with dozens of cargoes either anchored offshore or idling at sea as Asian buyers delay deliveries. While oil prices begin showing signs of recovering from historic lows, traders and analysts say the worst
It’s taken two decades but bullseye! From Domain: Household power bills are expected to fall after the Morrison government on Thursday approved energy market reforms to help prevent costly spikes in electricity demand. A new wholesale demand response system is due to come in by October 2021. It will pay smelters and other big power
Via the AFR comes Qenos: …gas is not just about energy. Gas is also a raw material, a building block for creating hundreds of thousands of new jobs within value-adding industries. Our nation produces more than 5000 petajoules of gas each year. Remarkably, one petajoule of gas supports 1600 Australian chemical industry jobs and contributes
Via The Australian: The developer of a major LNG import terminal, backed by mining billionaire Andrew Forrest, has warned that NSW and Victoria risk running out of gas by 2022, with the industry paralysed by regulatory uncertainty and low oil prices delaying urgent investments needed to cover a supply shortfall. …However, the developer said the
If you didn’t laugh you’d pick up a revolver:
And the outrage goes on, at the AFR: Santos’ $2 billion-plus Narrabri gas project is set to proceed for assessment under NSW’s independent planning process after the lower house of the state government voted down a bill on a moratorium on coal seam gas that controversially secured Labor’s support in the Upper House. Chief executive
It didn’t take long for Nev Power’s boondoggle to descend into farce, at the AFR: Former Fortescue Metals boss Nev Power has distanced himself from plans to dramatically increase public spending on gas infrastructure, saying a leaked document does not represent the view of the government’s COVID-19 commission. A manufacturing taskforce established as part of
At least it’s honest about gutting the economy, via The Australian: The National COVID-19 Co-ordination Commission, chaired by former Dow Chemicals boss Andrew Liveris, recommended the federal government take immediate action to create an gas market that could deliver globally competitive results similar to the US with gas available at just $4 a gigajoule, more
At the AFR the bogus debate rolls on: The controversial proposals from the Andrew Liveris-led manufacturing taskforce would take government involvement in the gas supply sector to a new level in Australia and have set the scene for a renewed clash between manufacturers and gas producers over prices. …Engendering most debate in the draft report
More excellent news for Australian energy prices. Qatar is flooding the global market, at the AFR: Qatar is forging ahead with the expansion of the world’s largest liquefied natural gas project and eyeing investment opportunities overseas despite a slump in global energy demand and the collapse of oil prices. Saad al-Kaabi, the country’s energy minister
Via The Guardian: Australian taxpayers should underwrite a massive expansion of the domestic gas industry – including helping open new fields and build hundreds of kilometres of pipelines – according to a group advising on Covid-19 recovery. A leaked draft report by a manufacturing taskforce advising the National Covid-19 Coordination Commission (NCCC) recommends the Morrison
Big news, at the AFR: Domestic gas will play an increasing role over coal in backing up the growing renewable energy sector over the next decade. But, beyond that, cleaner technologies including concentrated solar thermal power, hydrogen and even small-scale nuclear reactors could be used instead. The federal government’s long-awaited technology road map, which charts
