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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Arrow LNG done as gas pours through Panama?

While much of the Australian media and commodity analysts in government goggle at the LNG boom, it has taken one small paper, The Gladstone Observer, to render a sober assessment of the prospects of Australia’s last proposed mega-project, Shell’s Arrow LNG on Curtis’s Island: Global investors have become increasingly nervous about the cost of building

1

Gorgon is a monster all right

Goodness me that Gorgon is a cost monster. From the AFR: Chevron appears to be bracing for another cost blowout at its $52 billion Gorgon liquefied natural gas venture in Western Australia, potentially delaying an ­expansion of the country’s biggest resources project. Chief financial officer Pat Yarrington told investors in the United States on Friday that

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The Victorian gas debate doesn’t add up

The AFR today offers a long and not bad feature today on the Victorian gas debate which, sadly, again misses the most crucial point of all. First, it offers angry manufacturers: Peter Dobney, group manager of resources and energy at packaging giant Amcor, has blunt advice for the Victorian government on the looming East Coast

0

US-Japan gas love-in rolls on

An interesting exchange yesterday between US and Japanese gas interests in Singapore: The abundance of gas will have wide-ranging impact on global regulatory policy, the growth of gas markets, and overall economic expansion in Asia, concluded panelists at a lunchtime discussion during the Singapore Energy Summit. At “In Conversation – Gas, The Gamechanger?”, a panel

3

Japan piles into US gas

The Australian LNG boom is under outright attack. From The Australian: THE drift of big Japanese buyers of liquefied natural gas towards US shale gas has continued after Tokyo Electric Power Company finalised plans to increase its US gas imports by 50 per cent. …Japan’s Yomiuri Shimbun says TEPCO predicts the move will save it

5

LNG deflation will steepen capex cliff

A couple of good articles on LNG over the weekend reveal a few truths. At the AFR Angus Grigg and Lisa Murray delivered a solid backgrounder the highlight of which was quotes from Colin Barnett and Ross Garnaut: For West Australian Premier Colin ­Barnett, this unique situation could bring about growing strategic competition for natural

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Why won’t WA jump on board floating LNG?

Cross-posted from The Conversation The Browse Basin off the north west coast of Australia is rich in liquified natural gas (LNG), but questions remain over how best to exploit it. Oil and gas companies and the Australian Federal Government have approved new floating LNG technology (FLNG) which would remove the need for processing onshore on

0

Australian LNG is going to have to compete

One of Japan’s pre-eminent business leaders has hit back at criticism from Australian LNG producer Woodside over the Japanese government’s attempts to drive prices lower. From The Australian: Akio Mimura, the chairman of Nippon Steel and co-chair of the peak Japan-Australia business body, said it was wrong to say the Japanese government was intervening in

0

Woodside canvasses breaking LNG oil-link

From The Australian: Mark Hanna, senior general manager of LNG pricing at Woodside, told a conference in Tokyo yesterday…Japanese power companies…were posting losses because they were being prevented from raising prices to the extent needed, and from paying reasonable prices for their gas…As a result, power companies were becoming increasingly reluctant to commit to large

4

Russia moves to supply Asian gas

The competitors keep coming. From Reuters: DAEGU, South Korea, Oct 16 (Reuters) – Russia expects to liberalize its liquefied natural gas (LNG) exports from Jan. 1, and a bill will be submitted to parliament shortly, Energy Minister Alexander Novak said on Wednesday. Novak also said Gazprom and China National Petroleum Corp (CNPC) are expected to reach an agreement on gas supplies by

1

Why can’t Kogas sell its GLNG stake?

Korea’s KOGAS has been trying to offload a stake in the Queensland GLNG project for a year or so. It has emerged as well that it is also aiming to sell down it’s equity in Canada’s Kitimat project. From the WSJ: The move comes in the wake of South Korean government demands that state-run energy

5

Those stinky gas bears!

From the SMH: Bears have had a field day the past several months now, pointing to the prospects of a surge in gas exports from North America undercutting the economics of the local projects being developed in both Queensland and off Western Australia. This correspondent has long felt the fears were overblown. Now, it seems

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Interests to gather at the gas honeypot

The news from the AFR on Australia’s phony gas crisis gets weirder today. From the AFR: The Business Council of Australia is looking to broker a possible deal on the contentious issue of cushioning manufacturers from higher energy prices by ensuring adequate supplies of competitively priced gas are available for local use. On Friday the

0

Victoria to go slow on gas?

From the AFR: The threat of soaring gas prices will not prompt Victoria to more quickly develop potential gas fields on land, Premier Denis Napthine said. …Dr Napthine said Victoria had significant energy options with brown coal and offshore gas as well as wind, solar and wave energy. “We are very blessed with our energy

4

Australian shale gas a new honey pot?

An interesting development in the Australian gas saga today: CENTRAL Australia’s shale gas potential is drawing growing international interest and could lead US energy giants to sharpen their focus on the country after presiding over an extraordinary gas boom in North America. A leading energy investment bank in Houston, Texas, this week branded the Cooper

1

Canada adds heat for more US LNG

A post at the influential a US political blog, The Hill, is worth revisiting for the Australian gas discussion: British Columbia Premier Christy Clark landed in Washington D.C. on Friday to promote Canadian liquefied natural gas. And Japan’s Prime Minister Shinzo Abe two weeks prior made his first official visit to Canada to work on

4

North America seizes the LNG boom

From The Australian this morning: MALAYSIA has highlighted the risks to the growth of Australia’s liquefied natural gas industry by declaring its intention to push ahead with a $C36 billion ($37bn) plan to build an LNG plant in Canada. State-owned energy company Petronas, one of the founding partners of the Santos-led Gladstone LNG plant, could

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NSW gas debate doesn’t add up

From the AFR: Any hopes that the new consensus on the urgency of New South Wales’ natural gas problem would lead to softer rules for coal seam gas have been dashed. Much to the frustration of CSG companies, in particular AGL Energy, the NSW government has cemented the 2-kilometre buffer zone around residential areas. Indeed, the

1

No fracking way, says NSW

Cross-posted from The Conversation. New South Wales has introduced new rules for coal seam gas, meaning the state now has some of the strongest regulation in the country. The rules set aside 2.8 million hectares of important agricultural land – including vineyards and equine properties – that must be rigorously investigated before coal seam gas (CSG) projects

1

Wheatstone strikes Japan supply deal

Some good news for Australian KNG today. From the WSJ: Tohoku Electric Power Co. 9506.TO -0.83% has committed to a 20-year deal to buy more liquefied natural gas from Australia, reinforcing the country’s position as the biggest LNG supplier to Japan at a time that the world’s largest user of the fuel is debating whether to resume nuclear-power production.

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Now Canada cuts Australia’s LNG grass

Everyone is signing LNG deals right now, except us. From Platts: Canada and Japan agreed Tuesday to launch a bilateral energy ministerial meeting at the “soonest possible time” aiming to speed up realization of potential LNG supplies from the North American country, a source at Japan’s Ministry of Economy, Trade and Industry said Wednesday. …The