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
Via Global energy Monitor: Through a massive increase in portside infrastructure, floating offshore terminals, and oceangoing LNG vessels, the natural gas industry is seeking to restructure itself from a collection of regional markets into a wider and more integrated global system. If successful, this transformation would lock in much higher levels of natural gas production
Via the AFR comes The Cartel: Centre Alliance Senator Rex Patrick is pushing for modifications to the Australian Domestic Gas Security Mechanism to bring down gas – and therefore electricity – prices. He has pointed to chief competition regulator Rod Sims’ suggestion of $7 a gigajoule as a potential reference point, although argues the price
Via The Australian: Centre Alliance senator Stirling Griff says his party is “close” to a deal with Scott Morrison to pass his full tax cuts agenda and tackle high gas prices. “It’s getting close … we’re a 100 per cent behind income earners getting an extra boost in their pay packet,” he told ABC radio.
On Transparency International’s Corruption Index, Mozambique ranks 158 out 180. Australia ranks 13. Yet this: Africa is taking the lead in the next phase of global LNG mega-projects. 2019 will shatter previous records for the industry. Rystad Energy forecasts that LNG greenfield investment in 2019 will reach nearly $103 billion, the biggest investment year for the
Via AGL: Yada, yada, yada. More to the point, if Centre Alliance wins its tax cuts for gas reservation battle, AGL will shelve this gigantic floating rort forever.
Professional cartelier, Santos, is back again today: Santos chief executive Kevin Gallagher has declared there are plenty of producers of gas competing to supply the east coast market, dismissing a “cartel” allegation by Centre Alliance’s Rex Patrick, who is negotiating for tougher controls on LNG exports in return for support for the Coalition’s tax cuts.
Via the AFR: Senate crossbench powerbroker Rex Patrick is demanding Queensland’s LNG export “cartel” provides enough gas into the east coast market to ensure a surplus of supply amid other measures under discussion as the price for the Centre Alliance’s support for the Coalition’s proposed tax cuts. Under the proposal put forward to Resources Minister Matt
Via The Australian: Centre Alliance has signalled it could support the Morrison government’s full personal income tax cuts package as soon as Friday without a deal on gas being locked in, as Labor also leaves open the possibility of backing the flagship $158 billion tax plan in full. Stirling Griff, who with Centre Alliance colleague
Via The Australian comes the good news: Scott Morrison will move to ensure the Senate sits without a break until the Coalition’s entire $158 billion income tax cut package is passed when parliament resumes next week, after Labor’s frontbench yesterday rejected calls from its own senior MPs to wave through all three stages of the
Last week I noted the campaign to get Santos’ Narrabri gas project off the ground owing to its importance as a foil for the Centre Alliance push for gas reservation and, by extension, the ScoMo’s Government’s tax cuts. The AFR declared the project all but approved: Encouraging indications that the Narrabri gas project will go
This is what happens when a gas cartel ships too much gas into Asia so that it can gouge customers at home via an artificial shortage, via The Australian: Australian LNG producers face a slump in export revenue amid indications a global supply glut may persist up to three years longer than anticipated, depressing prices
The always evil AFR editorial is at it again: Encouraging indications that the Narrabri gas project will go ahead by the end of the year despite the obstacles stacked against it shows the right way to fix Australia’s energy crisis. Santos is spending $3 billion developing 850 coal seam gas wells in north-western NSW, and
Via The Australian: Australian energy producers have slammed a move by the Coalition to consider domestic gas reservation, arguing the interventionist measure wouldn’t lower prices for local users but would significantly increase the nation’s sovereign risk profile. …Cooper Energy, which is building the Sole gas project off the Victorian coast, said a reservation policy would
Bravo Centre Alliance, via the AFR: The Coalition is risking a brawl with the gas industry by actively considering a domestic gas reserve on the east coast for new projects as part of its push to get income tax cuts through parliament. The proposal, similar to a gas quota policy conceived by Labor three years
Here is the problem, via The Australian: AGL Energy says big gas users on the east coast face years of elevated prices, with the high cost of moving Queensland gas to southern states, expensive LNG imports and developing new domestic supplies locking in high tariffs for industrial buyers. Australia’s biggest electricity generator — working to
Awesome stuff from CA: Ten million taxpayers will have to wait for July 1 tax cuts, with Centre Alliance declaring the legislation is not “urgent” and is unlikely to pass when Parliament returns. The prediction effectively torpedoes hopes that the $1080 tax cuts the Prime Minister promised during the election will quickly pass Parliament –
Via The Saturday Paper: The federal government is considering further measures to ease the financial burden on pensioners and new moves to force domestic gas prices down, in a deal to secure enough senate support to legislate its proposed tax cuts in their entirety. South Australian senator Rex Patrick and his Centre Alliance colleague Stirling
Via The Australian: The father of Queensland’s $80 billion liquefied natural gas industry has warned that business and investment confidence could be destroyed by the state government’s deeply contested royalty hike killing “the goose that laid the golden egg”. Coal-seam gas pioneer Richard Cottee spoke out as industry body the Australian Petroleum Production and Exploration
Via the ABC: A decision on the Adani groundwater management plan is set down for tomorrow with environmentalists saying if the Queensland Government gives the green light it will set a precedent for six other mines also planned for the region and allow Adani to break ground within weeks. The Queensland Resources Council (QRC) said
Banana Republic 101. Two former resources ministers from opposite sides of the aisle squealing simultaneously at new gas royalties. One at The Australian: Former federal resources minister Martin Ferguson warned last night that the Queensland government’s surprise 25 per cent hike of gas production royalties in the state budget would jeopardise investment in mining and
Last night the EIA cut its oil demand outlook: The US Energy Information Administration on Tuesday cut its outlook for 2019 oil prices by $3.50/b for WTI and $2.95/b for Brent in response to rising uncertainty about global oil demand growth. Register Now EIA now expects Brent to average $66.69/b in 2019, down from $69.64/b
Via the AFR today comes Government lies on energy: …Centre Alliance supports stages one and two of the tax cuts and stage three in principle but believes they could be eaten up by rising energy costs. Senator Cormann said on Tuesday the government had an aggressive set of policy measures aimed at lowering power prices.
At the New Daily: Prime Minister Scott Morrison is under pressure to consider gas export limits to bring down power prices under a deal to secure the support of Centre Alliance for his tax cut package. Pensioners are also part of the negotiations, amid concerns seniors get little benefit from the $158 billion package and
Meet your skylarking Resources Minister writing in The Australian: A couple of months ago Bob Brown thought it was a fantastic idea to invade Queensland with an army of hypocritical and condescending activists. It is the one thing Bob and I agree on: I thought it a fantastic idea, too. …the truckies exploded. “Look at the
From Incitec Pivot yesterday: Hooray. Except, think about it for a minute. The QLD government has had to step in and heavy the gas export cartel to keep a national interest chemical manufacturer open. They’ve done some cosy deal on gas supply behind the scenes, probably in the premier’s office, released no cost details, and
Yet it remains painfully limited and wrong. Leading us off, last week the Asian gas price collapsed again amid the ceaseless glut, now down to USD4.20Gj or AUD6Gj. According to the Australian Domestic Gas Security Mechanism (ADGSM) we should now have a local gas price near $4Gj, back within historical ranges. Yet the spot market
Stinking up those radio booths. FiveAA Adelaide this time. Did a much better job than ABC radio.
Here if you’re interested. Alas everything useful I said ended up on the cutting room floor: there is no gas market, it has collapsed; more gas won’t help; there is an LNG cartel; the ACCC is an idiot; the power market is now failing as well. But, hey, got a plug in for reservation. I
Via the AFR: Competition tsar Rod Sims says there is “no reason” why east coast gas prices should not as low as $7 a gigajoule and has told producers they still risk driving domestic customers out of business by failing to put enough importance on the local market. Gas prices at $7 “would make an
Feast on our flesh, Rod Sims: Big Australian energy users face little respite from high gas prices and tight supplies, with greater action needed by producers to lower domestic tariffs, competition regulator Rod Sims will warn today. East coast manufacturers reliant on gas to power their operations still face the threat of being forced to
