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
From Cartel Canavan today: Bass Strait is declining as a supplier of cheap and affordable gas. We have been fortunate that gas production has increased in other parts of Australia, like the coal-seam gas fields of Queensland. These fields are the only reason that we can respond to the falling production in Bass Strait. This
What a firm! Via the AFR: Origin Energy will cut more than a third of the circa 1600 jobs in its integrated gas business in a dramatic step-up in its efforts to slash costs and protect against swings in commodity prices. Some 650 jobs will go this year, including 500 by April, according to an
Via Herald Sun: BLACKOUTS plagued more than 60,000 homes statewide at the weekend despite Victorians being slugged hundreds of dollars a year in fees to maintain the electricity network. The average household will pay from $404 to $673 in tariffs for poles and wires this year, a sum that can account for 20 to 40
Via Herald Sun: VICTORIANS have suffered the biggest hike in gas prices of anyone in Australia. Just two years ago, Victoria had the cheapest wholesale gas price. Now, it has the costliest. Victorians, the nation’s biggest residential users of gas, endured a doubling of the wholesale price paid in 2015 before the cost dipped slightly
Via AFR: As of the end of December, there were 4,417 megawatts of renewables projects under construction around the country, up by almost 500 MW from a month earlier, according to data released on Thursday by Green Energy Markets, an adviser on clean energy. Wind farms under construction will produce twice as much power every
Oil is dragging its anchor as the USD crashes: One does not have to look far to find who is buying: The massive speculative long is a punt that inventory draw down will accelerate and that US shale will not overdo it this time, via WSJ: U.S. shale companies are poised to earn real money
There are times when the human body is not cut out for dealing with the rage-inducing Australian politician: Federal Resources Minister Matt Canavan is scrambling to reassure some of Australia’s biggest LNG investors and customers in Asia about the new domestic gas security policy, amid fears it may cause lasting damage to multibillion-dollar project investments
Gottiboff is at it again today: There is a simple way to put eastern Australia on the track to much lower gas and power prices: appoint Peter Dutton as energy minister for a day. Australians, and particularly Victorians, are not being told the truth of how vast reserves of low cost gas are being concealed
Some charts today from John Kemp: Looks like the hot money is all on one side of the boat. More here. Any US shale response will tip it over.
Via Domainfax: Based in the outer Melbourne suburb of Bayside, ANCA is one of an increasingly rare cohort of Australian manufacturers. The precision tool manufacturer employs more than 1000 staff globally, with 450 in Australia, and turned over $180 million last year, but when its power supply contracts were up for renewal co-founder Pat Boland
Via Reneweconomy: AGL says no private investor would invest in new coal plant, but says battery storage is coming and will be major game changer as costs fall – which may not be far away. Several days after formally rejecting federal government requests that it invest hundreds of millions of dollars to keep the ageing
From the AIG: “The ACCC’s latest gas market update confirms that the gas crisis has shifted down a gear since early 2017 – but it also confirms Australian industry’s concerns that we are still far from affordable energy,” Australian Industry Group Chief Executive Innes Willox said today. “More supply is clearly being made available in
Via the ACCC today: This is the second interim report of the Australian Competition and Consumer Commission’s (ACCC) inquiry (‘the Inquiry’) into gas supply arrangements in Australia. The ACCC is focussing on the operation of the East Coast Gas Market, where there are continuing immediate and longer-term concerns. In the September 2017 report, the ACCC
From the always useless manufacturing lobby: The nation’s biggest manufacturers have called for an electricity price target after energy giant AGL said replacing the Liddell coal-fired plant with a green energy mix would need power prices to be higher than they have been recently in NSW for a new plant to be profitable. AGL at
From the AFR: AGL Energy has rejected Turnbull government pressure to extend the life of the coal-fired Liddell power station and instead revealed a $1.36 billion plan to replace it with electricity generated from gas, wind, solar and other supply. In a blunt rebuff of Canberra’s request for the 45-year-old Hunter Valley plant to be either sold
Over the coming weeks weeks, MB will roll out a series of primer presentations on various key topics, which are aimed at getting newer readers up to speed, as well as providing an easy-to-digest reference point. Today’s presentation covers Australia’s future of energy – a key theme that has been thrashed-out on MB over recent
It appears my fears about Arrow development are playing out already, via the AFR: The prospects for developing Arrow’s Surat Basin coal seam gas reserves took a huge step forward on Friday with news of a 27-year contract by Arrow, owned by Shell and PetroChina, to sell gas to the QCLNG venture in Queensland. The
You don’t say: Energy giant ExxonMobil has not paid a cent in corporate income tax in Australia in at least two years, despite reaping more than $18 billion from the nation’s natural resources, according to three of the company’s workplace unions. Tax campaigners accuse the company of cashing in on Australia’s soaring gas prices, but avoiding paying tax on its
This is potentially good news: Shell has finally paved the way for a multi-billion dollar development of its large Arrow coal seam gas resource in Queensland, inking a 27-year deal for the sale of the gas to its majority-owned QCLNG venture. The deal, one of the largest gas supply contracts on the east coast, involves two separate Shell
Via Domainfax: Australians can safely keep their air conditioners blasting during the summer’s heatwaves after energy operators found extra power to cover shortfalls. The Australian Energy Market Operator has identified almost 2000 megawatts of extra power, which it says will replace the 1600 MW that went off line when Victoria’s Hazelwood power station closed in March.
Hmmm… via the ABC: Thousands of Victorians will soon be eligible for a new power rebate from three major companies, under a new deal brokered by the State Government. Power giants EnergyAustralia, Origin and AGL will all give the rebates — worth hundreds of dollars — back to customers on default deals, also known as
Via the AFR: AGL Energy has shrugged off scepticism about its $250 million plan to import gas into Victoria, kicking off an official process to invite LNG players to supply the project. A formal request for proposals from a group of pre-qualified LNG suppliers was issued on Friday as AGL took a decisive step to follow
Quite rightly: US player Harbour Energy’s ambitions for an $11 billion takeover of Santos have run immediately into political hot water, as South Australian Treasurer Tom Koutsantonis signalled the state would seek to prevent the oil and gas producer falling into foreign hands. “The state government would be very concerned by any foreign takeover of Santos,”
Via the AFR: Big American oil is preparing to make a $11 billion all-cash takeover offer for Santos as the next step in play for regional and global relevance in rapidly reforming liquid natural gas markets. A consortium of powerful global energy investors, led by a former executive director of Royal Dutch Shell, Linda Cook,
Via The Australian: Queensland is exporting gas at record rates as resurgent oil prices boost LNG contract revenue and a Chinese push to reduce coal-fired power and heating pushes LNG spot prices and medium-term demand forecasts higher. China’s campaign to clean its air, particularly around Beijing, has already had a big impact on the prices
Via The Economic Times: India will save about Rs 4,000 crore after it got US energy major Exxon Mobil Corp to lower the price of liquefied natural gas (LNG) after the new rates kick-in from January next year. Petronet LNG Ltd, India’s biggest importer of liquefied natural gas, in August 2009 signed a 20-year deal
From The Australian: Gladstone’s big gas export plants pumped out LNG at near record rates last month, drawing gas from as far as Victoria to take advantage of resurgent LNG spot prices, despite major maintenance works. The situation, combined with rising oil prices, has helped send Origin and Santos shares to two and one-year highs,
Hoocoodanode, via the AFR: Industrial energy buyers on the east coast are seeing a fresh deterioration in the choice and terms of gas supply offers, only weeks after the federal government’s deal with Queensland LNG exporters for additional local supplies. Businesses seeking firm gas supply contracts are often finding only one retailer with gas available
Via the FT: Oil traders have a new political risk factor to absorb from Saudi Arabia with the move by the powerful Crown Prince Mohammed bin Salman to detain some of the kingdom’s most prominent business people, officials and princes. Saudi Arabia is the world’s second-largest crude producer, the biggest crude exporter and has the
