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


The great energy plundering rolls on

The gas cartel is undeterred by Do-nothing Malcolm: A softening in east coast gas prices in recent weeks has yet to bring down prices offered to manufacturers to levels they say are affordable, adding pressure to the federal government to slap restrictions on Queensland LNG exports for 2018. Sources close to gas buyers say that while the


Adam Creighton enters energy meltdown

From Adam Creighton today: Taxpayers will have paid more than $60 billion through federal renewable energy subsidies by 2030, about twice what the crumbling car industry received over 15 years and enough to build about 10 large nuclear reactors. The government’s large and small-scale renewable energy ­targets, which will compel energy retailers to buy 33


Something has to give: Gas, coal or pensioners?

Via Domainfax: The hype was interstellar, but the content …more terrestrial. The resting face of Energy Minister Josh Frydenberg presaged the package’s modest scale. Electricity companies will write to a million households by Christmas to offer them cheaper power plans, Prime Minister Malcolm Turnbull demanded. …”This is a very big breakthrough, and it’s happening here and now,” the


Richo barks up the wrong power bill

Via a roundly climate change skeptical Richo: Malcolm Turnbull is running out of options as to what issue he might choose to fight the next election. This week he threw away what seemed to me to be his best option. By far the biggest issue in Australian politics today is electricity prices. Neither the Coalition


North Korea shoots down ASX

Break! XJO has just seen its symmetrical triangle break down the wrong way. It’s taken out the 200DMA to boot: This clearly opens the way for lower. Thanks DPRK! This should still lead absolutely nowhere in terms of North Asian conflict. Japan and US have requested a UN Security Council meeting. But we’ve yet to


“Sleaze” Bank stock sinks with its reputation

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Lot’s of good material today on Australia’s great energy debacle. First, Thomas Parry foundation chairman of the Australian Energy Market Operator 2008-2015 does a great job of describing the history: Why is electricity in Australia now so expensive when not that long ago it was cheap? Following the UK privatisation model, Victoria – under a Liberal government


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From The Australian over the weekend: Prime Minister Malcolm Turnbull says South Australia’s energy plan is an “experiment” that should have been conducted privately. “You really have in South Australia, of course, been subjected to an experiment by (Premier) Jay Weatherill. People really should conduct these experiments, as dangerous as that, privately somewhere in expert


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Via AFR: The gas industry is set for another showdown with government over LNG exports after Federal Resources Minister Matt Canavan declared he was “underwhelmed” by the commitments so far from producers to address the east coast gas shortage while exporters insist that restricting exports would do more harm than good. Senator Canavan said he was writing on Monday to the national competition watchdog, the energy