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
Let’s hope so, via Platts: The latest flare up between Australia and China has ensnared more commodities but the likelihood of LNG being impacted is relatively low, despite vulnerabilities stemming from an oversupplied market and China’s growing options for gas imports, experts said. In the past week, China suspended Australian beef imports and threatened tariffs
For many years I have tried and failed to explain the operations of the Australian gas cartel. It has proven too complex and difficult for the shriveled and corrupted Australian media mind. Today bears the bitter fruit of that failure as the gas cartel devours Australia’s stillborn economic recovery. At issue is the east coast’s
Via the ABC: There’s a battle of ideas over how to reinvigorate the economy after the shock of COVID-19, but the make-up of the advisory body the Federal Government has set up to lead the recovery gives a good indication of which way it’s leaning. Amid calls for new investment in clean energy to cut
Rio wants it fixed, at The Australian: Rio Tinto boss Jean Sebastien Jacques says sorting out Australia’s long-term energy policy should be a key plank in the federal government’s plans to bring the national economy back from the coronavirus crisis, saying cheap and reliable power is one of the keys to economic recovery. Speaking to
Recall this, via The Australian: Centre Alliance has received a written guarantee outlining the Morrison government’s gas policy, which the key minor party demanded in exchange for its support for the $158 billion personal income tax cuts package. The copy of the draft gas policy, which has been signed by the government, was given to
He writes in The Australian today: When it comes to our energy supplies, Australians have been well served and we continue to enjoy ample supply of electricity, gas and liquid fuel. Our fuel supply chains have proven to be resilient during the past 40 years, despite many disruptions. We produce fuel ourselves, and we import
Via Argus: Shell expects to reduce LNG production by 8-17pc this quarter as global LNG demand slows because of the Covid-19 outbreak. Shell may need to reduce oil and gas production, LNG liquefaction, and utilisation of refining and chemicals plants as a result of demand or regulatory requirements or constraints in infrastructure, the firm said,
Via The Guardian: Independent MP Zali Steggall has asked the auditor general to investigate a Morrison government scheme to underwrite gas, hydro and coal power, saying it lacks transparency and citing legal advice that the Coalition had no constitutional or legislative authority to introduce it. Announced in late 2018 after the government abandoned Malcolm Turnbull’s proposed national energy
Via Deutsche: Monday’s remarkable session for oil still resonates through markets with the May WTI contract trading at -$37.63 per barrel at the end of the session. Although we’ve bounced since, this still marks yet another extraordinary chapter in the history of financial markets. We thought it would be interesting to raid our long-term database
Via Domain: Mr Power said the disruption to global supply chains caused by the pandemic presented Australia with an opportunity to re-imagine its moribund manufacturing sector. He said that, provided the right tax and cost settings, this could include high-tech, precision design and manufacturing and the domestic, industrial-scale production of largely imported goods. A key
Via Domain: Energy Minister Angus Taylor wants Australia to capitalise on depressed global oil and gas markets to deliver cheap energy for industry and boost the strategic oil reserve during the coronavirus crisis. The price of crude oil has plummeted, driven down by a price war among producing nations and coronavirus restrictions. The spot price
Via the AFR: Shell has finally given the green light for the first phase of the $10 billion development of the large Arrow Energy gas project in Queensland, shrugging off the slump in commodity prices and global cutbacks in spending across the oil and gas sector. The project will open up 90 billion cubic feet
The IEA does not mince words: Global oil demand is expected to fall by a record 9.3 mb/d year-on-year in 2020. The impact of containment measures in 187 countries and territories has been to bring mobility almost to a halt. Demand in April is estimated to be 29 mb/d lower than a year ago, down
Bloomie has no idea what it is talking about: Australia’s policy makers face a new challenge as they pump stimulus into a faltering economy: the Saudi Arabia-Russia clash that’s sent oil prices plummeting and belted the third-largest export Down Under. The cost of crude — which liquefied natural gas is typically priced off — fell
Via The Hill: President Trump on Monday said he would speak to Russian President Vladimir Putin following a morning call into “Fox & Friends,” offering a lengthy defense of his effort to forge a relationship with Russia. “Right after this call I’m speaking to a gentleman named Vladimir Putin. That’s my next call,” Trump told the Fox News hosts when
Via Bloomie: American pipeline operators have begun asking oil producers to voluntarily ratchet back their output in the clearest sign yet that a growing glut of crude is overwhelming storage capacity. Plains All American Pipeline LP, one of the biggest shippers of crude in the U.S., sent a letter this week asking its suppliers to
Cross-posted from FTAlphaville: Back in 2008 the economy suffered from massive oil demand destruction. The result was an epic contango structure in the futures curve which encouraged traders to charter tanks to store oil. A contango (the opposite of backwardation) manifests whenever the price of commodities in futures contracts is higher than the cash price
Via Banking Day: Skittish investors appear to have turned a spotlight on the credit risks linked to ANZ Bank’s comparatively heavy exposure to borrowers in the oil and gas industry. The bank’s scrip was the worst performer among ASX listed banks on Wednesday closing down almost A$1.76 or 10 per cent to a decade-low close
The oil crash is now kind of unbelievable: It is my view that oil is going to $10 and, possibly, zero. Even accounting for the tumbling AUD, this has now dropped local gas contracts to around $6Gj, double what they should be but half what they were. Contracts are generally priced at around 14% of
We could have had it any time. But 6k dead from COVID-19 has finally delivered cheap gas to the east coast, appoaching $4Gj spot: It’s still a little above net-back but pretty close: Even contract gas (95% of the market) has fallen to about $8Gj which is still ourageously expensive and far above our Asian
Some did on the dead bat bounce: But, at Bloomie: Saudi Arabia escalated its oil price war with Russia on Tuesday, as its state-owned company pledged to supply a record 12.3 million barrels a day next month, a massive increase to flood the market. The supply hike — more than 25% higher than last month’s
This is genuinely brain dead stuff, at Domain: The Morrison government has struck a landmark deal to tap into the US government’s tightly-guarded emergency fuel reserves, a move that will help lower the risk of Australia plunging into an economic and national security crisis. The agreement, to be signed by Energy Minister Angus Taylor in
Oil has thunderbusted at the open today. Down -27%: Via Bloomie: But the OPEC+ deal also aided America’s shale industry and Russia was increasingly angry with the Trump administration’s willingness to employ energy as a political and economic tool. It was especially irked by the U.S.’s use of sanctions to prevent the completion of a
Via Bloomie: China National Petroleum Corp. has issued a force majeure on all prompt natural gas imports, according to people with knowledge of the situation, the second Chinese buyer to refuse shipments in a sign that global commodity flows may face a sustained impact from the coronavirus fight. CNPC, the parent of PetroChina Co., is
Via Reuters: Already-battered jet fuel refining margins in Asia may come under further pressure in coming months as global airlines suspend more flights and more passengers cancel travel plans due to the widening spread of the coronavirus. The Asian jet fuel market has already suffered unprecedented losses this year due to the virus, which has
Via the ABC comes Stephen Long with the scoop: The head of Australia’s consumer watchdog has slammed the gas industry, accusing it of misleading governments into approving massive gas export projects that have led to soaring power prices, killing off companies and jobs. “A lot of the things that Australian governments, politicians, were told when
Twiggy Forrest wants to entrench the east coast gas cartel with his LNG import terminal. Now the Stokes family is into it, at the AFR: Seven Group Holdings boss Ryan Stokes has urged the Morrison government to maintain regulatory certainty in the oil and gas industry as a way to boost east coast gas supply
The one commodity market that is behaving rationally about global growth right now is oil. The world is swimming in the stuff despite oodles sitting on the sidelines. Chinese demand is down 4mb/d. There has been some offset in supply thanks to Libyan troubles removing 1mb/d but nobody there has much incentive to keep the
It never ceases to amaze. Dr Alan Finkel today: “Make no mistake, this will be the biggest engineering challenge ever undertaken. The energy system is huge, and even with an internationally committed and focussed effort the transition will take many decades.” “It will also require respectful planning and re-training to ensure affected individuals and communities,
Via Platts: **The impact of China’s coronavirus outbreak on LNG market is expected to worsen in coming weeks as economic activity in key manufacturing hubs struggles to rebound, keeping a lid on natural gas demand and triggering more LNG trade flow disruptions. **China’s state-owned CNOOC has declared force majeure on LNG contracts. **CNOOC remains most
