Both warnings have so far been ignored. But when studied in light of a fresh and disturbing analysis of the global LNG market, there is enough evidence to wake even sleeping civil servants in Canberra.
Two significant events occurred last week, a time which might one day be remembered as when expansion of the Australian LNG industry officially hit the wall. They were:
- Consulting firm Deloitte added its say to the chorus of alarms about the potential damage to the LNG market if the US joins the game;
- And Western Australian Premier Colin Barnett signalled that any delay to the Woodside-led Browse LNG project would be the fault of interfering environmentalists and their friends in Canberra.
The Deloitte report did not say much about the changing oil and gas world that people in the industry do not know already. It suggested that the era of pricing LNG against a basket of crude oils was coming to an end, and a gas-on-gas market was emerging as the US considered approving LNG exports, a move which could have a powerful effect on gas prices in Asia.
Lower gas prices are the last threat that the on/off Browse project needs as it struggles to hold together a restless joint venture, as opponents in government and in environmental lobby groups ratchet up their campaign.
Being able to use Canberra as a bogey man played right into the hands of Barnett, who has lashed his political career to the Browse development, even as partners in the proposed project head for the exit.
It's a step too far for The Slug to say that Barnett is using Canberra as a convenient villain in the Browse story, secretly knowing that the project with its monster capital budget - said to be more than $40 billion - has already run aground in the boardrooms of oil majors.
But having floated that as an idea it might be interesting to see if anyone in the WA Government has the confidence to dismiss the suggestion, bearing in mind that The Slug once worked in government and stuck his fingers into a few resource projects that the government of the day was promoting (just before an election), despite objections from the companies involved, which wanted to postpone investment decisions.
This comes on top of Woodside's struggle to justify the capital cost of the onshore Browse project and it looks like last week may have been a time when two LNG projects hit the wall, one onshore and one offshore.
For Barnett - who goes into the WA election as a "can-do, action man" with resources development stamped on his forehead - the loss of a key LNG project is more than an unfortunate event because it comes after a series of other project cancellations, topped by the canning of a new iron ore port at Oakajee and BHP Billiton's Port Hedland outer harbour the biggest, so far!
