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
You losers! That must be what the gas cartel is thinking as Asian LNG prices crater owing to oversupply: Reuters is reporting that Asian LNG spot prices have now broken the US$5.00 per million Btu mark. A lack of growth in demand and continued high levels of supply have been the primary causes of the recent
Via the AFR: NSW Labor says it does not believe assurances from Santos that all gas from its proposed Narrabri gas project would be sold to local industry, rather than exported, doubling down on its pre-election declaration that the $3 billion development is ‘dead’. Defying the Australian Workers Union support for the project to reduce
The ACCC was out with its LNG net-back price yesterday: It’s calculations for net back are higher than mine largely because of this: For a given measure of Gladstone FOB prices in A$/GJ, the next step in the calculation of netback prices is to deduct LNG plant costs. For this, the ACCC has used estimates
Because that is its plan. The ACCC confirmed yesterday that the gas cartel is still taking the major piss, via The Australian: Gas prices on Australia’s east coast are set to fall this winter, potentially providing some relief to long-suffering manufacturers and heavy industry, according to data from the competition watchdog. Domestic gas prices may
Talk about taking the mickey. Asian gas prices have cratered in the past few months, via Bloomie: Even cheaper prices are available in Europe. The current Asian price translates to an Australian gas price around $7. Yet, as of Friday, east coast prices are where they have been for six months at $10Gj. Moreover, the
As the idiotic debate around new coal fired power stations goes on, there is finally some good news in the fight against the real culprit in utility price spikes, the gas cartel. Prices for utility scale solar plus storage are now at parity with gas powered electricity: Costs have been falling at 20% per annum,
The reason why is obvious at The Australian: Coal-fired power generation would fall by 60 per cent within the next decade to meet Labor’s 45 per cent emissions-reduction target, leading to the likely closure of more than half the existing east coast plants, according to independent expert modelling. The closures would bring an end to
Examine this chart of Australia’s export performance from yesterday: Coal and iron ore have delivered new export revenue booms. However, the most spectacular surge is the takeoff in LNG volumes, which is now mostly complete. This is one reason why the Australian dollar is not as low as it should be. The commodities driven trade surplus has
Via the AFR: Historical prices for gas would not even cover the cost of production now, said Johanna Boothey, commercial head of ExxonMobil Australia, which spent $120 million on a fruitless two-well search for new gas in the Bass Strait last year and recently completed a $5.5 billion investment in a new gas development. …Cooper
The east coast gas cartel of BHP/Exxon, Santos, Origin and Shell has always been a grave national security threat given energy is the lifeblood of the modern economy. But if you want to see a direct threat to the national interest emanating from the gouging quintet then Orica just provided it for you: Orica is weighing
Via Reuters: Five LNG import projects are vying to start up between 2021 and 2022, possibly forcing gas users in New South Wales, South Australia, Tasmania and Victoria into more direct competition with Asian buyers for gas from northern Australia. Those states represent a yearly market of 420 petajoules (PJ), equivalent to 7.8 million tonnes
Via EnergyQuest at the AFR: One third of Queensland’s new $84 billion LNG export industry is likely to be forced to close down by 2025 due to shortages of coal seam gas reserves and the need for shipments to be diverted to local users, according to a detailed analysis of the sector. The findings by
Australians are paying more for their gas than the Japanese again. Asian spot prices are today at approximately $9Gj. On the east coast of Australia they are approximately $10Gj. Under the terms of the Australian Domestic Gas Security Mechanism (ADGSM) the local export net-back and spot price should now be $7Gj. Though we should also
Via the AFR: The weaker LNG export market has “taken the top off” domestic gas prices in the eastern states but industrial buyers are still jostling for supplies available within the new normal range of $9-$11 a gigajoule, well above historical levels, according to one of the few producers with gas to sell next financial
If gall could be converted into energy that is. Via the AFR: EnergyAustralia managing director Catherine Tanna has unleashed on the “big stick” bill that introduces measures to force the divestment of energy assets, bluntly telling a Senate committee it is a “desperate and dangerous” measure by the Morrison government to “look tough” ahead of
Via CNBC: Exxon Mobil and Qatar Petroleum on Tuesday announced a final decision to finance a $10 billion-plus project to export liquefied natural gas from the Texas Gulf Coast. The decision moves forward the latest export terminal fueling growing shipments of U.S. LNG, or natural gas cooled to liquid form, for overseas travel. The Department
Thank goodness, via the AFR: Credit Suisse energy analyst Saul Kavonic said that despite the crowd of proposals, none may get a green light this year. “I remain sceptical of an LNG import terminal achieving FID [final investment decision] this year due to poor appetite by industrial buyers, social licence challenges, and the risk posed
Via Reuters: Spot prices for March delivery to Asia LNG-AS this week fell to $7.00 per million British thermal units (mmBtu), down $1 from the previous week, lowest since April 6, trade sources said. They are also seasonally at the lowest for this time of the year since 2016, Reuters data showed. This translates to
With Judith Sloan making perfect sense and no sense at all: By the time I was driving home, a series of rolling brownouts (a cute term for electricity being cut off in whole suburbs) was under way. The chief executive of the Australian Energy Market Operator, Audrey Zibelman, was cheerfully informing us that cutting back
By Leith van Onselen Domestic gas prices rose sharply in Melbourne, Sydney, Brisbane and Adelaide in December, while large industrial gas users still struggle to secure affordable deals with energy producers. Traditional sources of domestic gas supply such as Bass Strait are on the decline, while a lot of the gas from newer sources is
Via the AFR: Gas producers are privately voicing reservations about proposals that would require them to report on sales contracts, reserves and export prices, worried that the measures intended to increase transparency in the under-pressure east coast market could put them at a commercial disadvantage. The recommendations, released by the national competition regulator and the
Yes, it’s gas cartel gouge time once again. After the treasonous ACCC did nothing again yesterday on the gas market, the cartel is making hay charging Aussies $11Gj spot prices across the eastern seaboard while Asian prices are in the $9Gjs. Meanwhile, according to the disastrous ACCC, contract prices are: …offered and agreed in mid-2018
The ACCC was out with its gas market update yesterday and not once, not once in a 120 page document, did it mention the word “reservation”. Despite this hilarious chart: 71% of east coast demand is the gas export cartel. If we held just 10% of that back then all our energy problems would be
From QLD Resources today: Queensland has given the green light to a new Surat Basin based project which will see more gas made available for the domestic market. “Last month I announced that a joint venture between Santos and Shell had won the right to explore for gas in Surat Basin – gas which will
Yes, it’s back. The east coast gas cartel is once again charging Australians more for their own gas than the Japanese, Chinese, Koreans or anybody else that happens along. Via the FT: Liquefied natural gas prices in Asia have hit a six-month low as warmer than normal winter weather and forward buying by Chinese importers
Via Domain: ExxonMobil has made a final investment decision on its Bass Strait gas project, which will bring more gas to Victoria in the next five years. The decision backing the West Barracouta field, located off Victoria’s shores, boosts ExxonMobil’s Gippsland Basin output. Exxon did not disclose the volumes but this gas is not for
Via the US Studies Centre: Australia and the United States have much in common: liberal, democratic institutions; technologically advanced, largely open economies; growing populations; demanding infrastructure; and above all, abundant energy resources. But with respect to energy, Australia and the United States are on radically different paths. Australia faces an energy crisis, stressing households and
Via The Australian: Manufacturers and heavy industry may be forced to shift operations overseas or shut down as energy prices soar three times higher than in the US, sparking fears of a fresh crisis for big users, analysis backed by Dow Chemical has warned. Queensland, the home of three LNG export plants, pays more for
Via the AFR comes Australia’s BCA head and chief energy wrecker, Grant King: “In the last four terms of parliament, two under Labor and two under Coalition governments, we have lurched from one extreme to the other in terms of policy outcomes,” Mr King said on Monday night. “The most recent idea from government has been
Via the AFR: Energy producers and investors are regarding a possible Labor government after next year’s general election as offering the prospect of a defined energy policy that, while potentially tougher for the industry in some areas, will at least bring an end to what some have described as “almost uninvestable” situation under the Morrison
