Bloomberg has a credible assessment today of US shale longevity that is worthwhile vis our own LNG boom: The problems arise when you look at how quickly production from these new, unconventional wells dries up. David Hughes — a 32-year veteran with the Geological Survey of Canada and a now research fellow with the Post Carbon
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.
Capital Economics has a nice note out this morning on global gas price convergence. On the supply side: Based on current projections, Australia’s output of LNG will grow from a provisional 21m tonnes in 2013 to 82m tonnes by 2019. The country will overtake Qatar as the world’s largest producer. Less certain, but equally ambitious,
Courtesy of JPMorgan: The LNG cost curve has been rising for the past 10 years as result of more expensive materials (e.g. steel), energy costs, labor and upstream reserves (drilling and development costs). According to our database the most expensive LNG projects, measured on an integrated basis (i.e. including the capital costs of upstream and
I haven’t seen this report but it agrees with my own analysis completely. From the AFR: US exports of liquefied natural gas are likely to undercut the most expensive Australian projects by about 30 per cent, providing healthy margins for owners of the US projects, according to JPMorgan. …It estimates unit costs for Chevron’s $US54 billion
From Business Spectator, Industry Minister Ian Macfarlane has junked proposals for domestic gas reservation arguing that: “There is no good reason for reservation policy. It is ideological claptrap,” Mr Macfarlane told reporters on the sidelines of the APPEA conference in Perth. “You haven’t got the gas in NSW to reserve and in Western Australia, if
Jennfier Hewitt‘s gas junket, paid for by the Australian Petroleum Production & Exploration Association (APPEA) delivers again today with another headline story bashing those in the way of gas development: Colin Barnett insists he is a realist but he doesn’t easily give up on his dreams. Or on his threats to those who get in the
The AFR has an interesting piece on the ongoing conflict between LNG buyers and sellers over pricing regimes: The head of Japan’s quasi-national oil company Inpex Corporation fears a “lose-lose” result in the global liquefied natural gas market unless producers and suppliers resolve their differences over supply, demand, and pricing. Toshiaki Kitamura will tell the
Ah yes, the junket, an age-old way to get positive coverage of your issues in the media. Today we have masterful execution of such from the Australian Petroleum Production & Exploration Association (APPEA) with it’s finger prints all over Fairfax’s LNG coverage. First it’s Jennifer Hewitt: For a man responsible for more than $80 billion worth of
From Platts today, Canada has approved four huge LNG export terminals all on its West coast: The four facilities–Pacific Northwest LNG, Prince Rupert LNG, WCC LNG and Woodfibre LNG–were previously approved by Canada’s National Energy Board in December 2013. The licenses cover the export of up to 73.38 million mt/year of LNG, or about 3.43 Tcf/year.
By Leith van Onselen Last year’s 60 Minutes investigation into coal seam gas (CSG) provided an eye-opening account of Australian farmers being forced to allow CSG mining on their land against their will. Today, The Australian reports that Santos and AGL Energy will pledge to the New South Wales Government that they will not enter
By Leith van Onselen In a move that is certain to infuriate the oil and gas lobby, the New South Wales Government has announced that it will freeze coal seam gas (CGS) exploration applications for six months, review existing licences, and significantly increase licencing fees. From The Guardian: The Premier, Barry O’Farrell, accused the former
From LNGWorldNews: U.S. Subcommittee on Energy and Power examined H.R. 6, the Domestic Prosperity and Global Freedom Act. The bill will accelerate approvals of U.S. LNG exports to American allies. The legislation facilitates automatic approvals of all export applications that have been noticed in the Federal Register and modifies the process moving forward so that
And on it rolls: Veresen said that it has received a conditional order from the U.S. Department of Energy (DOE) to export liquefied natural gas from the proposed Jordan Cove LNG export terminal to those countries that do not have Free Trade Agreement (FTA) status with the United States. Under the DOE order, Jordan Cove
Australia’s North Asian customers seem quite comfortable with the idea that LNG contracts need to be broken. From LNGWorldNews: Changes in the pricing structure of natural gas and LNG are needed if Asia is to take full advantage of the “golden age of gas,” senior Korean officials told the Gastech 2014 VIP programme that was
From LNGWorldNews: The Subcommittee on Energy and Power, chaired by Rep. Ed Whitfield (R-KY), has scheduled a hearing for March 25 to review H.R. 6, the Domestic Prosperity and Global Freedom Act. In response to Russia’s recent aggression and DOE’s slow export approval process, Rep. Cory Gardner (R-CO) introduced H.R. 6 to expedite exports of
From the AFR: US natural gas prices could rise by more than half and LNG exports would still match up economically against supplies from traditional shippers to Japan such as Australia, according to the International Energy Agency’s head of global gas markets research. Speaking in Sydney on Thursday, Anne-Sophie Corbeau, senior gas analyst at the Paris-based
By Leith van Onselen The “voice of Australia’s oil and gas industry”, the Australian Petroleum Production & Exploration Association (APPEA), has issued a media release slamming The Australian Institute’s (TAI) release yesterday of a report entitled “Fracking the future”, which attempts to bust gas industry myths about coal seam gas (CSG), while at the same
By Leith van Onselen Early last year, I wrote an article, “Fracking the countryside”, questioning the merits of extracting natural gas trapped in shale rocks or coal seams via the process of hydraulic fracking. This process essentially involves drilling and inserting a pipe deep into the ground and then pumping millions of litres of high
From Citi today: Given upstream delays, CSM-LNG looks short gas — We have built well-by-well models to define likely gas production for the GLNG, APLNG and QCLNG projects. Given delays in upstream facilities of 3-6 months for all projects, we think the industry will be short gas for 12 months from 4Q15, when all 6
By Leith van Onselen Another article appeared in the Weekend AFR arguing that New South Wales faces big job losses if gas prices are allowed to rise on the back of LNG exports from Queensland: …western Sydney will bear the brunt of expected shortages in natural gas in NSW that are predicted in just over two
It’s not just the Chinese that have stuffed up their northern WA investments. From the AFR, Gorgon appears set for more delay: Shell – which has a 25 per cent stake in the massive venture, Australia’s largest single resources investment – classified Gorgon in a presentation released overnight as a project starting up in “2016-2018.”
From the AFR: Chevron has revealed it is marketing gas to underpin an expansion of its $US54 billion Gorgon liquefied natural gas project in Western Australia but has refrained from committing to a timetable to adding to the massive venture, which has suffered repeated cost blowouts and delays. “As with other LNG projects around the
By Leith van Onselen The industry group representing food and grocery manufacturers has reportedly warned of the possible loss of profits and jobs as escalating gas prices, brought about by the completion of large scale east coast LNG projects, drives-up manufacturing costs. From The Australian: The Australian Food and Grocery Council has told the federal