LNG boom turns to bust as falling oil price hits exports, Matt Peacock, Australian Broadcasting Corporation, July 21, 2016:
Australia’s largest ever investment boom of $200 billion into Liquid Natural Gas (LNG) during the past decade has crashed spectacularly, and left the Federal Government with little or no revenue to show for it.
- $200 billion invested in Australian LNG projects over the last decade
- Australia set to become the world’s biggest exporter of LNG
- LNG price has fallen 75 per cent
Australia’s gas is now being exported to Asia at close to the cost of production, leaving investors with marginal returns and raising the prospect some coal seam gas projects may be mothballed.
Energy analyst, Greg Houston, says the LNG crash is a slow moving train wreck:
We are on the cusp of becoming the biggest gas or LNG exporter in the world. But the collapse of the gas price means that there will be little or no financial benefit.
Two years ago, Forbes’ business writer Clem Chambers stated:
The trend is your friend, at least until the bend in the end.
Indeed, early participants look good when a bubble begins to form but latecomers are simply running with the herd and inevitably, they become big losers. Smart money depends upon it. Sophisticated players profit when asset values rise and profit again when asset values fall. This is a reality of the marketplace. The artful take advantage of the artless.
Christy Clark and her crew spent more than a billion dollars through the Ministry of Natural Gas Development, gave away billions more in gas industry subsidies and promised low or no taxes, taxpayer-paid infrastructure and subsidized electricity; all in the hope of creating an LNG industry that had a competitive disadvantage from the start.
Critics like the one you’re reading knew LNG promises were hollow but this Government would rather waste vast sums to avoid admitting failures from incompetence and poor judgement. They will ultimately argue bad luck and unforeseeable circumstances; knowledgeable people will know differently.
In comments, Barry mentions private power contracts lasting decades. Here’s an example, taken from an AltaGas investor notice. The company boasts of profitability guaranteed to increase steadily through CPI price indexing. I’m reminded of one advocate for education stating this was a courtesy never extended to public school systems
By the way, be aware that taxpayers spent almost $1 billion building the Northwest Transmission Line. It serves Imperial Metals’ Red Chris Mine and AltaGas. I hope the Liberal Party is doing well in their relationship with AltaGas; the company is certainly benefiting.