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
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
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
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
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
North Asian LNG prices hit a three year low yesterday at $11mmBtu: The price of liquefied natural gas in Asia has plunged by nearly half over the past five months — to the lowest level in more than three years — as Japan and South Korea have slowed fresh purchases and supply has risen. South Korea
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
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
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
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
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
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
By Leith van Onselen From the The ABC comes news of a new report by the New South Wales Chief Scientist warning of potential deleterious impacts from coal seam gas (CSG) extraction near Sydney’s water catchment, arguing that fracking should be banned if “the risk to human health can’t be known with a high degree
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
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
More mega-project porn for your enjoyment. From APLNG: And Gorgon:
More on the fallout from the Russia/China mega gas deal: With Russia able to ramp up its Eastern Gas Program and China partially reducing its LNG demand growth, global LNG supply could be in further excess, which could be absorbed but at a lower price, affecting LNG developers. Although 3.7-Bcf/d of pipeline capacity based on
From the SMH on the recent China, Russia gas deal, gas industry consultant Graham Bethune of EnergyQuest said: …”Australia’s LNG sector should be mightily concerned as the project cost for Russia in its China supply deal is about the same cost as our own Gorgon project – but with a capability to supply 80 per
By Leith van Onselen In another potential blow to Australia’s magnificently expensive seven LNG projects, Citigroup has released an interesting research report forecasting a “slump” in Japanese LNG demand from 2015: Japan is a key player in world energy markets, accounting for 35% of LNG (seaborne trade)… Since the March 2011 disaster, consumption has increased
Russia and China have fused at the hip with their mega-gas deal that will pipe $400 billion worth of gas over 30 years. From the WSJ: “This will be the biggest construction project in the world for the next four years, without exaggeration,” Mr. Putin told reporters. The deal also called for at least $75
China and Russia are expected to sign a new mega-gas deal in the future but it failed to eventuate last night. From the AFR: President Xi Jinping of China and the Russian leader, Vladimir Putin, were unable to announce an agreement on a natural gas deal, despite high expectations that mutual political interests would help
From the AFR: …Woodside dropped plans last year for an onshore LNG plant on the Kimberley coast for its Browse gas resource, which would have cost a huge $80 billion or more. Instead, the venture, which includes Shell and PetroChina, is reworking the project to use floating LNG, avoiding the need to develop the controversial
Here’s the latest in our series of pics of the major LNG projects. From Santos’ GLNG, that is one humongous fridge under construction to freeze the gas: Fit a tinnie or two in thar!
The AFR carries an interview today with Citigroup’s worldwide head of energy strategy, Seth Kleinman that is sobering reading: “We’re living in a world of restrained capex, whatever corporate speak each individual company throws out; even the Chinese are reining in capex now, which is really not what people were expecting…Marginal projects are getting left
From Bechtel, here’s the latest in our series on LNG megaproject construction:
From the AFR: No matter how the Ukrainian crisis pans out, Europe’s efforts to pare back its reliance on Russian gas have been given fresh impetus. LNG suppliers, even those in far-flung Australia, look set to benefit as a result, at least in a few years’ time. Europe’s anxiety at being held hostage to Russian
For the third time in three days, there is significant movement on a major Canadian LNG project. We’ve already seen China leap into bed with Prince Rupert LNG with planned capacity of 29 million tonnes per annum (MPTA) and Pacific North West LNG with initial 12 mpta capacity moving to 18mpta. Today we’ve got formal
Is the AFR determined to ruin Jennifer Hewitt? Following her recent resources funded junkets to Perth and Biao Forum, she off to North Rankin LNG to sing more praises under the heading “Drop the resources prejudices”: Am I allowed to say I am feeling rather macho? I have survived the helicopter ride to the North
I’ve tracked and tried to bring some clarity to the east coast gas debate for 18 months but it’s hard going. The debate is framed in terms of growing supply as the solution to higher prices versus environmental amenity. But nobody ever discusses anything tangible like where the pipelines run and where more NSW and
From the AFR: The US House energy committee has approved legislation to limit the length of review time for liquefied natural gas export applications, in a compromise aimed at attracting bipartisan support for speeding up US gas shipments overseas. The bill, passed by a vote of 33 to 18, would require the Department of Energy
From LNGWorldNews: Progress Energy Canada, Pacific NorthWest LNG and Petronas have signed transaction agreements whereby Sinopec, through its affiliates, will acquire a 15 percent interest in Progress Energy’s LNG-destined natural gas reserves in northeast British Columbia and in the proposed PNW LNG export facility on Canada’s West Coast. As part of the transaction, Sinopec has
