You’d have to be noseblind, as they say, to not smell some of the naked desperation that is now coming to the surface as the resources boom moves into its next phase, which is, let me look it up, oh yeah, that’s right, bust.
Thus, Premier Annastacia Palaszczuk of Queensland is ordering Clive Palmer to front the 237 workers made redundant by the Queensland Nickel refinery going into administration — a curious Japanese-style public shaming designed to make it clear to one and all where the blame lies for jobs disappearing. Or the quiet and steady revising down of steel production quotas all over the Western world, with throat clearing from BHP/Billiton about what a tough year it’s going to be.
But the most bittersweet moment was last weekend when, for the second time, a company shipped its first cargo of LNG from the brand-new Curtis Island processing plant complex in Queensland, bound for Asia. The three LNG plants on Curtis Island turn coal-seam gas (CSG) from Queensland facilities into liquefied natural gas, which can be taken out in tankers.
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Leaving aside the environmental issues, it’s a bold and innovative approach to using new resources and finding new markets — bold and innovative and nuts, because the facilities have come on line just as the Saudis have opened the oil spigot yet wider, and as the Chinese announced the completion of their first major CSG production zone.
Origin, which shipped its first load, $40 million worth, in December, was putting a brave face on it: “Nothing should detract from the achievement of any major project getting to completion, not just ours, because they are big and complex projects,” said calm but hysterical CEO Grant King. “It would be a lot more exciting if oil prices were US$100 a barrel, but our job is to manage the cycles we are in.
Nor can anything hide the fact that the Curtis Island development — three identical LNG plants worth tens of billions of dollars, whose construction has plunged Santos and Origin into billions of debt — was part of a cargo-cult mentality, the belief that the boom would keep booming long enough to make such a vast project viable in the short term, and able to “ride the cycles” in the longer term.
Neither scenario looks like being borne out. They may have anticipated a cyclic downturn in prices a decade ago, but no one anticipated $28-a-barrel oil, with the price being driven by political as well as economic motives.
Nor did they anticipate, it seems, the degree to which China would itself get into the CSG/shale gas/fracking game — an oversight borne of an underestimation of China’s capacity for sustained growth, and the advantages derived from a mix of state planning and market forces.
Thirdly, no one appears to have factored in mass political change in the world, and the degree to which the major new economies would commit themselves to a pathway towards renewables — even though it should have been obvious that renewables make economic sense for statist economies.
Finally, they failed to see the degree of tooth-and-nail local struggle against an industry involved in hauling methane up through soil and water systems and whose claims to be a “clean” industry have long since gone the way of all lit farts. The coming together of community groups under the Lock the Gate banner is now a huge problem for them.
Apart from that …
The Curtis Island imbroglio represents all that’s unthought-through in the resources-led approach. Presented as a commitment to innovation, the whole mega project was really slave to a set of cultural and ideological assumptions: that the gas was sitting there, worth something, and that it would always be worth something.
Furthermore, there’s a deeper set of assumptions buried in the endless Asian-markets approach, and that is that China and India will always be there for us to gain a value-added return from — first as imperial subjects or gunboat-dominated consumers (of opium), then as natives grateful for our Western science magic (as per Bill Leak’s transcendentally stupid cartoon depicting a dozen Gunga Din caricatures trying to eat solar panels).
The plain fact is that our economic plan is coming up against China’s political plan — and India’s to a lesser extent — which is autarchy in key goods. You didn’t have to be a Beijing-watcher, working out who’s saluting who on May Day parade podiums, to have seen that coming. The CCP has made its aims clear in its five-year plans and political communiques.
The people running our trade policy have never been able to see this, because they weren’t willing to take the politics seriously. To a degree, they simply did not have the training to make it possible to recognise the politics.
The result of that is that these facilities now have a shortage of gas for the contracts they’ve made — the contracts are pegged to the oil price — and if it goes much below $25/barrel they’ll be producing at a loss. Meanwhile, they’re buying gas off each other and looking for any gas they can find, even the most marginal. The effect will be to drive the price of domestic energy up, as the gas is sucked out of the domestic market.
That, apparently, was our five-year plan.
In response to this exciting initiative — the language of “innovation” applied to a dying industry at vast expense, beyond any reasonable risk calculus — and to a plunge of up to 60-80% in their share prices, Santos and Origin are talking merger, which they are also presenting as “exciting”. More like two drunks hooking up to save on rent to pay for more booze, if that’s your definition of romance. The proposed merger is being portrayed as something that will allow for efficiencies.
Efficiencies like, mmmmm, not having identical LNG conversion plants side-by-side at the same port, perhaps?
Never mind. When two of the three plants are mothballed, they can be added to our tourist industry, vast and imposing follies of an earlier era, the Big Delusion joining the Big Pineapple in the roster of must-sees. Face masks will need to be provided to cover the stench — but not that of the gas.