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

8

Macquarie calls out Twiggy gas gouge

I’ve been a lone voice on this as usual but no more. Via The Australian: A spat over gas prices has erupted between the Andrew Forrest-backed consortium planning to build Australia’s first import facility and Santos as concerns grow that the domestic producer may be forced to shelve its controversial Narrabri project in gas-starved NSW.

20

Any royal commission into power must include gas

Via The Australian: Malcolm Turnbull is facing pressure from both sides of politics to establish a royal commission into retail electricity pricing, with the Greens to table a bill for a wide-ranging inquiry amid a push by Coalition backbenchers for the Prime Minister to launch an ­investigation into the conduct of power companies. The Greens

0

LNG’s final insult arrives

Via The Australian: Rebounding global oil prices are set to deliver an $8.1 billion windfall to export revenue over the next two years, as the nation’s expanding LNG sector gets a double benefit from rising output and higher prices, helping boost export revenues to a record $238bn this financial year, the federal government’s commodity forecaster

0

IEA hoses LNG bulls

From the new IEA gas report: Three major transformations are set to shape the evolution of global natural gas markets in the next five years, setting the scene for this Gas 2018 market outlook:  The People’s Republic of China (hereafter, “China”) becomes the world’s leading importer of natural gas. Driven by continuous economic growth

11

NSW goes all-in on Twiggy gas

I must be mad, via the AFR: The Andrew Forrest-backed NSW gas import terminal proposed for Port Kembla will have its regulatory approval period fast-tracked by six to eight months, after the state government declared it a critical infrastructure project because of its importance for energy security. The decision is “a powerful demonstration of the

0

Oil market’s OPEC scenarios

by Chris Becker It’s crunch time for the oil cartel as they attempt again to shore up their own individual fiscal black holes by fiddling with the supply/demand curve of black gold. Both Brent and WTI crude prices rallied throughout the latter half of 2017 before a correction in early May this year. WTI: Brent:

4

China exempts LNG from trade war

Via the FT: When China last week set out a list of US exports threatened with retaliatory tariffs, almost all fossil fuels were covered, including oil, coal and liquefied petroleum gases such as propane. There was, however, one conspicuous exemption: liquefied natural gas. Beijing’s decision not to impose additional tariffs on US LNG shows the

0

What next for oil?

Via the IEA’s OMR: In this month’s OMR, we publish our first estimates for global oil demand and non-OPEC supply for 2019. Rapidly rising prices in recent months have raised doubts about the strength of demand growth, and we have modestly downgraded our estimate for 2018. Prices are unlikely to increase as sharply as they did

14

East coast gas farce doubles

Yes, somehow the farce has doubled in just a few days. Last week it was Twiggy Forrest importing gas to NSW. Now it’s AGL to Victoria: AGL Energy has struck several deals for its proposed liquefied natural gas import jetty at Crib Point in Victoria, which could help deliver more gas to Victoria and South

18

Twiggy Forrest’s east coast gas play will dramatically raise prices

Andrew Forrest’s new east coast gas play is just another disastrous chapter in Australia’s gas monstrosity. Via AFR today: AIE is the sponsor of not one of but three separate plans to import LNG for sale into domestic gas markets. Forrest has involved himself though his privately owned energy play, Squadron Energy. He was introduced

3

What next for oil?

Since it has had a pretty decent correction let’s ask the question: Goldman remains very bullish: Saudi Arabia and Russia signaled today that they would likely ease their production cuts in the second half of the year. Comments by their Energy Ministers suggest that such a decision would be driven by concerns that high oil

3

Shall we give LNG import rights to the export cartel?

More absolute garbage today on gas, via The Australian: Oil and gas giants Royal Dutch Shell and ExxonMobil have been urged to consider the development of liquefied natural gas import terminals on Australia’s east coast as the race to build the first of the facilities intensifies. Saul Kavonic, the principal Australasia analyst for international consultancy

10

Coaliton wedges self as energy loons take over asylum

It’s all bodice ripping, hair pulling and hysteria now, at The Australian: Craig Kelly, backed by Tony Abbott, called for the competition watchdog to be given new powers that would make it “crystal clear” that closing down a essential service utility when there were “other options”, such as selling to another player, was anti-competitive behaviour.

10

Block the Santos takeover or commit suicide by gas

Via The Australian: Leading gas market analysts Wood Mackenzie and EnergyQuest are tipping east coast gas prices to rise above $10 a gigajoule, despite federal government and gas industry moves to divert more supplies to domestic markets. …Wood Mackenzie said east coast prices were forecast to head to between $10 and $13 a gigajoule. …Mr

14

One Nation makes perfect sense on gas market reform

Via the AFR: Industrial gas users representing more than 10 per cent of east coast domestic demand are at risk of closure because of high gas prices, with upward pressure on tariffs only set to worsen, according to leading industry consultancy Wood Mackenzie. Senior analyst Saul Kavonic said the most at risk are about seven