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

42

Six years late, SmoCo discovers gas climate change solution

Via SmoCo this afternoon comes a notion six years too late: “We need to get the gas from under our feet. There is no credible energy transition plan for an economy like Australia, in particular, that does not involve the greater use of gas as an important transition fuel.” “There are plenty of other medium

7

A brawl with Big Oil is just what SmoCo needs

Late Friday I reported on a possible victory for MB: The review recognises that price is an important indicator in establishing whether the domestic market is functioning effectively and considers that the ACCC’s forward LNG netback price series is the most applicable prices when estimating the likelihood and extent of a potential shortfall. As such,

2

ADGSM review recommends gas reservation price trigger

Sort of. From the Australian Goverment: The Australian Government introduced the Australian Domestic Gas Security Mechanism (ADGSM) in July 2017 in response to a forecast gas supply shortfall in the eastern domestic gas market. The ADGSM provides the Government with the ability to restrict LNG exports to secure domestic supply. On 6 August 2019, the

0

UBS: Gas crash to provide power price relief

Via UBS: Wholesale electricity price futures are sharply lower Our updated wholesale electricity price forecast expects prices will average $74/MWh across the National Electricity Market (NEM) in CY20, declining to $70/MWh in CY21—reflecting a material revision down from our prior forecast. Baseload futures through CY20-21 are sharply lower than 3 months ago and our mark-to-market

12

Productivity Commission’s gas WTF

These test tube economists are a plague, via The Australian: Forcing Australian gas exporters to increase their domestic output could “distort resource allocation” and drive up energy costs over time, the Productivity Commission has warned. …The Productivity Commission said reductions in production could deliver lower gas supply volumes, shifting higher costs on to the gas

0

The oil glut that just won’t budge

From the EIA: EIA forecasts Brent crude oil spot prices will average $65 per barrel (b) in 2020 and $68/b in 2021, compared with an average of $64/b in 2019. EIA expects West Texas Intermediate (WTI) crude oil prices will average about $5.50/b lower than Brent prices through 2020 and 2021, compared with an average

8

Gottliebsen’s stinking gas cloud

He’s as persistent as he is horrifying. Gottiboff today: Queensland ALP Premier Annastacia Palaszczuk must be enjoying exposing weaknesses of the “new Labor” policies of Victorian ALP Premier Daniel Andrews. Queensland’s Senex has signed a contracts to supply its recently-discovered Surat basin coal gas to CSR’s Brisbane brick and plasterboard operation, as well as packaging

0

Propaganda push seeks gas reservation stall

Via the AFR: Gas supply on the east coast gas market has dramatically loosened up thanks to record production, bringing down domestic prices and weakening the case for federal government intervention, according to a leading research consultancy. …Despite only a modest rise in LNG exports from Gladstone, the market saw a surplus of 17 petajoules

0

Europe debates designating LNG climate hostile

Welcome to the new frontier of LNG doom. Via FTAlphaville: This is a guest post by Rauli Partanen, an author, analyst and communicator on climate change, environment and energy systems. Partanen co-founded and leads Think Atom, a non-profit think tank advocating nuclear energy alternatives. In this post he argues Germany’s interests in natural gas are jeopardising the European Taxonomy for

7

Russia shoves giant gas pipe up Aussie energy

From the WSJ journal today: An 1,800-mile pipeline is set to begin delivering Russian natural gas to China on Monday. The $55 billion channel is a feat of energy infrastructure—and political engineering. Russia’s most significant energy project since the collapse of the Soviet Union, the Power of Siberia pipeline is a physical bond strengthening a

4

Destroyed gas market dumps LNG imports

It just keeps getting worse for Autralian gas users. Via Domain: Global energy giant ExxonMobil has scrapped plans to build a gas import terminal on the Victorian coast, deepening fears for large energy users about rising costs and a looming supply shortfall facing southern states. …ExxonMobil said it had undertaken an “extensive study” to determine

6

COAG Energy Council fails completely

What a bloody joke: Energy Ministers met in Perth on Friday for the first COAG Energy Council meeting in more than 11 months. Here’s some of what happened. First up, it won’t be quite so long between COAG Energy Council drinks next time around – another meeting has been scheduled for March next year. “Technology-Neutral”

59

Why isn’t Sun Cable run to Sydney instead?

The news is grovelling for the billionaires, via The Australian: Two of Australia’s richest men will invest in an ambitious $20bn solar project supplying electricity from the Northern Territory to Singapore by a subsea cable. Iron ore billionaire Andrew Forrest – ranked 8th on The List – Australia’s Richest 250 with an estimated $7.34bn fortune,

11

Australian energy goes Third World

Today we have a nice demonstration of what happens to long term fixed assets when they are surrounded by ideological mismanagement for long enough. The damage takes decades to manifest but when it comes it is disastrous and there is nobody left to fix it. To wit, the National Electricity Market which is now being

17

Scummo threatens to blackout Victoria on his power price fail

Welcome to the new era of partisanship run amok, via the AFR: Federal Energy Minister Angus Taylor will seek to cut deals with “collaborative” states to shore up the destabilised national electricity grid, potentially isolating Victoria over energy and climate policy. …It is understood the bilateral agreements will involve funding or other arrangements to achieve

7

Norway runs rings around Australia’s gas idiots

A new report by the Australia Institute estimates that through its sovereign wealth fund’s two-thirds ownership of Equinor, the Norwegian Government stands to make $8.1 billion from oil and gas exploration in the Great Australian Bight, which is greater than Australian taxpayers would make: Norwegian oil company Equinor is planning exploratory drilling for oil and

0

OPEC backs off oil cuts

Voia Bloomie: The biggest producers in OPEC+ aren’t pushing for deeper oil-supply cuts when the group meets next month, according to delegates across the coalition. The Organization of Petroleum Exporting Countries and its allies are more likely to stick to their current output targets and encourage members to comply more fully, the delegates said, asking not

3

Australia’s gas cartel killer takes shape Outback

Via Bloomie: The answer to the renewable energy industry’s biggest challenge is emerging in the Australian outback. Early next year, one of the first power projects that combine solar and wind generation with battery storage is planning to start up in northern Queensland state. The Kennedy Energy Park, just outside the sleepy town of Hughendon,

0

Idiotic gas cartel hollows itself out

It’s both darkly amusing and just as Origin Energy hollows itself out thanks to its monstrous gas gouge: Gas volumes and shipments up and local electricity sales crashing as they are priced out by the same gas shipments sending power prices wild. ORG is cannibalising even itself. Is it any wonder this spectacularly stupid business

10

ScoMo pays a billion dollars to drive up power costs

It just keeps getting weirder, via The Australian: An extra $1bn will be pumped into the Clean Energy Finance ­Corporation to turbocharge development of next-generation electricity production and upgrade the transmission network to future-proof the grid and drive down prices. The first new capital provided to the CEFC since it was established in 2012 will