Citi says so: Oil markets are persistently misunderstanding this Friday’s meeting of the OPEC JMMC in Vienna, confusing it with an OPEC ministerial meeting and expecting decisions related to whether the producer group plus Russia and other non-OPEC countries will extend and/or deepen their output cuts. Little could be further from reality. The producers
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.
The new gas narrative is given greater impetus today by the ACCC: Australian factories are at risk of shutting down and sacking workers as the nation’s gas exporters starve local customers in favour of overseas clients, according to a dire warning from the competition watchdog that clears the way for a gas crackdown. The Australian
If you want to know why Do-nothing Malcolm suddenly loves coal then look no further than this: The opposition leader just wrapped up a two-day visit to the sunshine state selling Labor’s $1bn tourism plan, flying out as Turnbull flies in. But where the opposition leader sought to better promote one of the state’s best
The MB line on the energy crisis is now official. Via The Australian through gritted teeth: The use of high-cost gas for electricity generation has almost doubled in two years, producing a perfect storm for household bills of record gas prices and a growing reliance on it to fill the energy gaps as coal plants come off
Via The Australian through gritted teeth: The use of high-cost gas for electricity generation has almost doubled in two years, producing a perfect storm for household bills of record gas prices and a growing reliance on it to fill the energy gaps as coal plants come off line. The Australian understands that modelling provided to
Phil Coorey had an interesting piece on the weekend about Do-nothing Malcolm’s attempts to be popular: …on Monday, AGL boss Andy Vesey found himself being chased by the media though Canberra airport and into Parliament House like a common criminal, to be subjected to a public show trial by the Prime Minister and Energy Minister over why
It’s getting worse not better as Do-nothing Malcolm’s political barstardry leads the nation down the energy rabbit hole. From the AFR: AGL Energy has moved to avert any push from Canberra to break up the company amid speculation that an expected attack by the competition watchdog on anti-competitive electricity supply will be seized on by
Via the AFR: Coal-fired generation equal to 10 Liddell power stations will have to be closed by 2036 for Australia to meet its Paris climate agreement pledge, the Australian Energy Market Operator says. AEMO’s network development plan released last December said that for Australia to meet the pledge the Turnbull government made at the Paris climate talks in
Via UBS: Domestic market accepts diverted Qld LNG gas; GLNG the surprise player Our June 2017 research note on east coast gas concluded that there would be no physical gas shortage, just a shortage of cheap gas, as Queensland LNG projects divert more gas into the domestic market. Since June we have seen this thesis
Via The Australian: Bill Shorten asks the same question, hoping repetition will prove effective. “How much of power bills for Australia has gone up since the Liberals formed government in 2013?” Malcolm Turnbull admits power prices have gone up since the Coalition won power, much to the delight of opposition MPs. “They came down significantly
As the Coalition hearts coal today, the US National Renewable Energy Lab (NREL) has released staggering new cost profiles for US utility scale solar: Solar PV capex cost cratered 29% year on year to a levelised cost of electricity of $0.43kWh. This is way faster than we have previously estimated was possible: Utility solar +
Via Credit Suisse: AGL’s 90-day commitment no different to prior voluntary commitment, now more politicised: following a meeting with the Federal government, AGL has committed to revert in 90 days with an alternate plan to the Government’s preference of keeping Liddell operating beyond its 2022 end of life. We note that AGL had already committed
You can see where it’s going. The Coalition election machine is switching course and revving up. It’s not going to tackle any issue of substance impacting the country. Instead, it’s going to go full blown coalmania, out of the blue, to shoot for another energy election bamboozling. Via the AFR: The federal government has confirmed the
As do-nothing Malcolm and his loser mates attack renewables and champion coal, the real culprit, gas prices, being forced to discount because it has flooded regional markets, via Goldman: It has been suggested in the press that Petronet may have successfully renegotiated terms with ExxonMobil relating to its c.1.5mtpa 20-year contract with the Australian Gorgon
Via Citi: The market is still digesting the potential impact of Hurricane’s Harvey, Irma and Katia on oil balances but focus is likely to soon turn to the IEA’s September OMR that is published this Wednesday. The Paris-based agency’s August report caused a stir given the sizeable downward revisions to its headline oil demand
My God, this nation has become a walking idiot. Here’s what Do-nothing Malcolm has secured for the future of energy security to lower prices, via cock-a-hoop Australian: Malcolm Turnbull has struck a deal with power giant AGL to prevent a looming energy shortage by extending the life of a vital coal-fired power station for five
Dalian is trying repair overnight damage today: Big Iron is down sharply. BHP and RIO failed at largish double tops, at least for now… Big Gas is soft but the pensioner abuse specialists continue their predictable but appalling re-rating: Big Gold is off sharply. I remain a seller short term: Big Sleazy has caught a
The AFR hasn’t done too bad a job on energy. Ben Potter finally converted to energy transformation in recent years and Angela Macdonald-Smith has, at times, described the great gas gouge. But it sure ain’t coming from the top, via Michael Stutchbury’s note on the weekend: Coal is Turnbull’s new black. Wages the economic growth
Via the Financial Post: India has renegotiated the pricing of liquefied natural gas (LNG) imported from Australia’s Gorgon project to save more than Rs 10,000 crore over the life of the contract. Exxon Mobil Corp has agreed to charge 13.9 per cent of the prevailing Brent oil price at the port of delivery rather than
Via the AFR: Santos and Origin have inked a new deal to supply Chinese-controlled plastics maker Qenos with ethane until the end of 2019. Santos announced in November 2014 that it has signed a new five-year deal to supply ethane gas to Qenos in NSW. At the time, the deal was heralded as avoiding the potential loss of more
Question: what relevance does this have? From The Australian: The head of government relations with energy giant AGL is a graduate of Al Gore’s climate-change leadership program whose move to the corporate world last year follows a quest to “change the system from within”. Tony Chappel is part of AGL’s executive team responsible for engaging
Via the AFR: Santos and its GLNG project partners have taken their most decisive step yet to head off damaging caps on gas exports, agreeing to divert 30 petajoules of gas away from export and into the domestic east coast market. The move comes as the federal government is due this month to decide whether to declare
Reap the whirlwind. The Coalition’s self-made energy crisis has finally exploded. From the top, mining is furious: The chief executive officer of miner Rio Tinto has lashed out at Australia over its rising energy costs, saying the country had kicked “a national own goal” letting states set their own energy targets and make their own gas access
Dalian is trying to rebound: BHP is still nudging breakout: Big Gas continues its re-rating with exporters down and the domestic gougers flying: All I can say to that is, what a pack of bloody idiots we are. Big Gold is powering, working beautifully as portfolio insurance. I’m still a seller here for the short
According to Gotti, yes: A big part of the energy problem is gas prices. There are two “real, practical solutions” required. The first is to divert gas that was ear marked for Queensland LNG exports to NSW and Victoria. As far as I can tell the federal government has done this. Well-done Josh Frydenberg. The
It appears Do-nothing Malcolm can’t even write a press release: Energy company AGL has stressed it has no plans to operate its Liddell power station beyond the 2022 closure date and insists it has not yet agreed to sell the station to enable another operator to keep it functioning for another five years. After Prime
From The Australian: …the Australian Energy Market Operator warns of an immediate shortage of power this summer and a longer-term threat from 2022 if Liddell shuts down as planned. The alarming conclusions, to be released today, say South Australia has up to a 33 per cent chance of failures this summer while Victoria has a