Australia’s LNG Export Boom Turns Out to Be No Prize
Laments for the collapse of highly-inflated expectations that a liquefied natural gas export boom would spur British Columbia’s economy—or Canada’s—are finding some perspective in Australia’s experience, as reported in the Guardian.
While Australia and the United States have largely captured the Asian market for natural gas that Canadian developers once eyed, the benefits have proven elusive for Australians and shareholders in its LNG companies, the paper reports. The nation may be experiencing a “natural gas export boom,” it says, but the activity “is causing soaring gas prices and pushing up carbon emissions,” while the infrastructure built to support foreign gas sales “appears to be rapidly shedding value.”
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One firm, Santos Ltd., “wiped more than A$1 billion off the value of its liquefied natural gas plant in Queensland” on Tuesday, a week after Origin Energy announced $1.2 billion in similar write-downs.
“The whole [LNG export] project was built on over-inflated forecasts,” observed Dan Gocher of the shareholder activist group Market Forces. With gas prices driven down by a persistent global glut in unwanted crude oil, Australia’s exporters are facing a hard landing.
On the home front, filling pipelines to the two newly-devalued export terminals, together with a third owned by Shell, has had the effect of “vacuuming [up] Australia’s gas and caused domestic prices to skyrocket,” The Guardian notes. “Meanwhile, Australia’s greenhouse gas emissions rose dramatically in the latest quarterly report, a rise that is mostly caused by the operation of the three LNG plants.”
As the Institute for Energy Economics and Financial Analysis’ Bruce Robertson summed it up: “This industry has torn up its shareholders’ wealth, and now it’s tearing up the nation’s wealth.”
The grim assessment strongly bolsters a view that Canadian economist Jim Stanford, formerly with the Unifor trade union and now a resident of Australia, offered earlier this month. Australia’s experience, he suggested, shows that Canada’s more deliberate regulatory process “likely saved us from wasting tens of billions of dollars on the biggest white elephant in Canadian history.”