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

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Indian LNG dreams turn sour

From the AFR: Woodside Petroleum has stepped up its LNG marketing efforts in India, personally led by chief executive Peter Coleman, but price looms as a major hurdle in securing long-term contracts for the company’s high-cost projects. Mr Coleman, who is among several resources sector chief executives taking part in a government-led trade mission to

1

Canada chases Japanese LNG customers

From the WSJ: Advisers for liquefied natural gas projects on Canada’s west coast recently passed through Tokyo on an Asia tour to drum up interest for the projects in the energy-hungry region. Joseph Bevash, a partner of Latham & Watkins, acknowledged that less costly LNG projects in other countries could undercut 16 projects proposed in Canada, but

6

India, Japan push for group LNG buying

From LNGworldnews: Japanese Prime Minister Shinzo Abe and his Indian counterpart Narendra Modi agreed to extend the cooperation between the two countries on a wide range of areas including LNG. With the goal of recognising the critical dependence of the economies on imported energy sources and the vulnerability to supply shocks, the two Prime Ministers affirmed their

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A perfectly useless gas debate

Former Labor stalwarts Greg Combet and Craig Emerson appear at Gina’s Financial Review today to mount another empty argument about gas: Without urgent new coal seam gas development in NSW the state’s industrial gas users will face uncertain supply and price volatility during peak usage periods from 2016. Gas-intensive manufacturing is already migrating from Australia to the

2

QLD gas prices crash before spike

The Australian has an interesting story today on crashing QLD gas prices: QUEENSLAND gas prices have slumped to record lows just as $70 billion of LNG export projects being built at Gladstone start to increase production from thousands of coal-seam gas wells ­designed to fuel the plants. The flood of cheap gas comes as exporters start

18

LNG glut is now

Reuters has great story telling you exactly where the global LNG glut is suddenly at: U.S. oil major Chevron is struggling to lock-in 20-year sales contracts for its Gorgon liquefied natural gas (LNG) export plant in Australia, the world’s most expensive, as buyers spoiled for choice by new suppliers hold out for cheaper deals. …”Buyers

14

US pushes monster Alaska LNG project

From LNGworldnews: Governor Sean Parnell issued a statement after the U.S. Department of Energy announced the Alaska LNG project is exempt from a new rule changing how the department handles LNG export permissions. The exemption greatly streamlines the Alaska LNG project application. “This is a clear signal the Alaska LNG Project is gaining momentum,” Parnell said. “I

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LNG price slump signals warning for future

From LNGworldnews: Prices of spot liquefied natural gas for September delivery to Asia plummeted 33.1% year over year to an average $10.702 per million British thermal units (/MMBtu), the latest Platts Japan/Korea Marker (Platts JKM) for month-ahead delivery showed. The drop came as increased supply in the region continued to outweigh lackluster demand. On a

0

Canada’s first LNG project moves towards FID (members)

From the WSJ: KUALA LUMPUR, Malaysia–Petroliam Nasional Bhd., Malaysia’s state-run oil and gas company, said Wednesday it is in talks with four potential partners from Japan and the Middle East for stakes in its Canadian liquefied-natural-gas project. The potential partners are conducting due diligence, Petronas Chief ExecutiveShamsul Azhar Abbas said. He declined to name the companies

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LNG prices off the canvas as Gorgon conflict grows

From LNGworldnews: After the spot LNG prices have, by many reports, hit bottom in the past few months many buyers have returned to the market to stock up for the coming winter period and higher prices expected in October and November. Platts Japan Korea Marker for September delivery rose from $10.525/MMBtu by $0.30/MMBtu over two

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Australian LNG a “lost cause”

Energy advisory Douglas Westwood has report out titled “Australian LNG – A Lost Cause?”. Recent news headlines on the liquefied natural gas (LNG) sector in Australia seem to be centered around its unsustainable rising costs. Woodside Petroleum had to ditch plans last year for its Browse LNG plant, which had gone way over budget at an estimated

2

Gorgon bids farewell to contracts

The AFR reported over the weekend that: Chevron has insisted it will take the risk of selling a chunk of LNG from its $US54 billion Gorgon project in Western Australia into the spot market rather than accept lower prices under contract sales as it struggles to sign up long-term customers who are holding out for

3

US applies LNG blowtorch with yet more projects

Uncle Sam is on an LNG tear. Overnight the US Department of Energy (DOE) approved another new LNG project for exports and this time it’s a greenfields project in Oregon,suggesting even more could be in the pipeline OregonLNG will have a capacity of 9 million tonnes per annum (mtpa) and begin shipping in 2019. That takes

9

Australian gas blunders set example in N. America

The AFR’s John Kehoe has an interesting piece today on LNG: Australia is setting an example to the United States Congress: how not to open up an energy market. ­Manufacturing companies and their lobbyists are briefing legislators on Capitol Hill that Australia’s natural gas prices have tripled because of the extra demand from overseas buyers. Congressional Republicans

2

LNG price crash persists

From Reuters today: Asian spot liquefied natural gas (LNG) prices edged lower last week as buyers low-balled sellers amid ample supply from Papua New Guinea and Australia, while bets of a winter price pickup spurred some into floating storage plays.Spot LNG prices for September delivery slipped slightly to $10.50 per million British thermal units (mmBtu)

0

Canada and China sign LNG MOU

I don’t see this kind of stuff happening here. Everywhere but here perhaps: The Province of British Columbia and the National Energy Administration of the People’s Republic of China signed a Memorandum of Understanding (MOU) on Thursday to strengthen energy trade and investment. “The continued growth of our economies depends on foresight and partnership,”said Premier Christy

3

LNG spot weakness weighs on contracts

From LNGWorldNews: Recent PIRA Energy Group weekly report finds that multiple offers comfort the buyers but hurt the spot sellers, and Henry Hub in the U.S. dipped bellow $4, while Europe’s oil-indexed pricing becomes more important in spot/contract relationship. “Explaining the current weakness of the spot LNG market is not a huge mystery; buyers are consuming

7

Alaska’s LNG monster project moves forward

Preparations for a North American gas boom are going gang-busters. From LNGWorldNews: In another important step forward for the Alaska LNG project, an application to export liquefied natural gas (LNG) was submitted to the U.S. Department of Energy. The export application requests authorization to export up to 20 million metric tons per year of LNG for a

7

WSJ gives Australian LNG a deserved caning

From the WSJ today comes an overdue examination of the Queensland LNG white elephant: Big export projects each need thousands of wells to be viable. Unexpectedly weak flow rates at some wells have forced companies deeper into the Australian Outback to hunt for resources. The process harnesses sophisticated computer-directed drills that pinpoint pockets of gas

1

LNG spot crash persists as Shell talks it up

Cross-posted from LNGworldnews: Prices of spot liquefied natural gas (LNG) for August delivery to Asia plummeted 26.5% year-over-year to an average $11.365 per million British thermal units (/MMBtu), the lowest monthly average since April 2011, the latest Platts Japan/Korea Marker (JKM) for month-ahead delivery showed. The drop came as supply continued to outweigh demand. The

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Oz, Japan agree murky “market principles” for LNG (members)

Shinzo Abe and Tony Abbott released a joint presser yesterday after their pow wow. From Platts: Japanese Prime Minister Shinzo Abe and his Australian counterpart Tony Abbott made a joint statement Tuesday saying LNG prices should be based on “market principles” and underlining “the importance of further promotion of flexible gas markets.” Following a summit

1

APLNG passes more milestones

Cross-posted from LNGWorldNews: Three key milestones have been met by Australia Pacific LNG in recent weeks representing strong progress across the breadth of the CSG-LNG project. Hydrotesting of LNG tanks on Curtis Island has commenced, construction of the main gas transmission pipeline has been completed, and the gas from the recently commissioned Condabri Central gas

9

Another LNG mega-project bites the dust

Missed this yesterday but it’s important. Santos declared its Bonaparte FLNG project sunk at sea. It is still considering a pipeline option to back fill Darwin LNG but in macro terms it means the following, from Macquarie:. Further evidence Australia’s market window has closed. Against this backdrop, Arrow LNG has been indefinitely deferred, Browse JPP

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Will increased CSG lower domestic gas prices?

By Leith van Onselen Santos chief executive, David Knox, has today implored Australia’s authorities to support coal seam gas (CSG) extraction, arguing that it is essential to ensure that supply can catch-up to demand, which is expected to triple on the East Coast as the Gladstone LNG export plants come on line, in turn lowering

8

Australian LNG in the fight of its short life

The Australian is reporting today on local LNG running into trouble after China/Russia gas deal: On the same day that Santos chief executive David Knox tried to calm the rising fears about the implications of the deal for ­Australia, Macquarie yesterday painted a bleak outlook for the next wave of multi-billion-dollar LNG plants and expansions

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Australian LNG shot in energy war

From Santos today: US liquefied natural gas exports won’t be cheaper for Asian customers than LNG that can be supplied from Australia, according to Santos chief executive David Knox. In a speech in Brisbane on Thursday Mr Knox is set to paint a bullish picture of prospects for Australian LNG exports, playing down concerns that

4

Australian LNG priced-out

The AFR is carrying some sobering analysis abou Australian LNG today: …according to LNG expert Fereidun Fesharaki…who has close links with LNG buyers, the flexibility Asian buyers have to use other energy sources such as coal was being ignored in the “crazy” forecasts for LNG consumption espoused by some producers and analysts. “The customer that

8

Gorgon 80% complete

From LNGworldnews: Chevron’s Gorgon LNG project in Australia continues to make steady progress toward first liquefied natural gas, and is 80 percent complete with start-up expected in mid-2015, George Kirkland, Chevron’s vice chairman said at the company’s Annual Meeting of Stockholders in Midland, Texas. Almost 6,000 people are working on constructing this massive LNG project, which includes the