90 seconds at 9 am: LNG bonanza

90 seconds at 9 am: Dairy prices hold; US CPI tame; EU sets limits on auditors; Australia's gas future; NZ$1 = US$0.825 TWI = 77.8

18th Dec 13, 7:17am by David Chaston

Here's my summary of the key news overnight in 90 seconds at 9 am, including news of the latest dairy auction overnight.

Overall, prices held, up only 0.2% from the previous auction. But they are 51% higher than a year ago in US dollars, and 55% higher over the same period in NZ dollars.

One feature of today's results is that whole milk powder prices declined, especially for the June 2014 contracts. All other commodities rose. In fact butter and cheese both rose fairly strongly and these are the products Fonterra is stuck with because it does not have enough milk drying capacity - so that is a good sign. However, while it is up 8% from the last auction - up 14% over the past three events - butter is only just back to the prices it won when it was first offered in these auctions in March this year. Butter and cheese have some catching up to do.

In the US, consumer prices are steady there too. Today's release of November data showed that prices are up 1.2% over the year, kept down by falling petrol prices.

The EU has finally agreed on auditor rotation - but in a very watered down version. The maximum term auditors will be allowed to be appointed is now 24 years. Still, that is progress over anywhere else.

Later this morning we will get the details of the September current account and that is expected to show a slight deterioration from 4.3% of GDP. Then at 1pm ANZ's business confidence report will be out, and that is likely to be pretty upbeat.

Yesterday's contrast between the NZ and Australian fiscal updates was interesting, but had little impact on our currency - except to push it higher against the Aussie. Our 'good news' seems to have been already priced in by currency markets.

It is not all doom & gloom for the Aussie though - their enormous gas reserves are exciting analysts who think LNG exports could eliminate the Australian current account deficit, something iron ore has been unable to do.

The NZ dollar starts today at 82.5 USc, up again to 92.7 AUc, and the TWI is unchanged at 77.8.

The easiest place to stay up with today's event risk is by following our Economic Calendar here »

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24 Comments

by Boatman | 18th Dec 13, 10:48am 1387316924

Re Aussie LNG , I still dont understand New Zealands reluctance to exploit its natural resources more efficiently for the benefit of all New Zealanders, and to help our Balance of Payments.

Maybe Kiwis dont see , or dont realise, the potential economic benefits .

Maybe we dont fully understand the need to diversify our economy from our over- reliance on Dairy in the longer term

OIL AND GAS

We , (like Norway ) have for two generations , been exploiting offshore oil (without incident) , and we should be doing more of this .

Unlike Norway which does this through a SOE called Statoil , we dont have a big stake for ourslelves .

FISHING

Why are our fishing and downstream canning operations so small in relation to our Marine assets?

We seem to be happy to have Korean and other Asian fishing vessels doing this in our waters , but we do relatively little ourselves .

The NZ Fishing and fish canning and processing could be bigger than Dairy, and certainly bigger than Tourism

Its an opportunity wasted.

Instead we have the Greens wanting us working unsociable hours in tourism in piss-poorly part-time paid jobs as waiters and cleaners changing toursits dirty bed linen.

by waymad | 18th Dec 13, 11:09am 1387318144

I think the answer to your observation is the age-old solution to a whole lotta problems:

"Turn them into Beggars so they're Easier to Please".

by OMG_WTF | 18th Dec 13, 11:07am 1387318028

"Unlike Norway which does this through a SOE called Statoil , we dont have a big stake for ourslelves ."

There's your answer, Boatie. Norway's people get mega-bucs for the common good. NZ get a laughable royalty, multi-bucs go overseas or to one family, NZ's richest. Why risk killing our environment for them?, sensible Kiwis ask themselves.

by @tony | 18th Dec 13, 12:34pm 1387323256

Oil and Gas.

Yes lets all have the money now and wo cares about the planet; it will be only be unlivable after we are dead anyhow.

Bring on the good times.

http://www.youtube.com/watch?v=X0gtzHJphVg

by Boatman | 18th Dec 13, 12:41pm 1387323676

Oh get over it , I am not suggesting exploitation of every inch of the ocean .

Nor am I suggesting we destroy the planet , if that ever happens , the Chinese industrial sector will be more likely to do so than New Zealanders

Besides , if you leave it for 100 years , you will be dead , your kids will be poorer have paid for your Super and Medical costs , and we may have exited the Oil Age, in which case no one wll need it anymore .

by @tony | 18th Dec 13, 12:58pm 1387324707

Bit hard to get over it (losing the planet) when the comment seemed very unbalanced.

The good news is that you understand whats at stake. I do agree with a very controlled and limited explotation of the finite resource.

Yes sadly China may kill us all unless we have the guts to do somethign about it.

Vent your anger in the right direction:

Stop (threaten) trading with China unless it does reduce carbon production?
Stop USA setting stupid rules in WTO and form a group without them?

As for NZ... NZ produces food, and with water running out all over the world then I am pretty glad I live in an agricultural country actaully. If NZ is careful and manages things well (right...) it should be a very good place to live.

I actually also agree with there being too many eggs in basket; but where is the govt incentive for the high tech small businesses? where is another Xero? Where are the grants? NZ has the brain power...

by JB | 18th Dec 13, 12:54pm 1387324450

For massive new LNG exports to rescue Australia's current account - surely we need to know the ownership of these facilities - If offshore then incremental LNG exports will make the C/A worse ?

Can someone assist and explain please ?

by Vanderlei Luxemburgo | 18th Dec 13, 12:57pm 1387324669

I agree with you to an extent there Boatman. We should be making better use of our resources for the benefit of NZ Inc. There are numerous examples around the world of countries who have done it right. The Norse/Statoil example is excellent - keep profits, employ a lot of local labour/manufacuring, serious environmental standards etc.

I disagree with your poke at the Greens though. We've never had a Green govt. We've had a variety of centrists in blue or red shirts, and they have allowed these resources to be underutilised. Put the blame at the feet of those who've earned it.

by profile | 18th Dec 13, 2:35pm 1387330511

LNG exports saving the day for Oz, the US crude oil production hitting production numbers last seen in 1970, British Geological survey predicting enough gas in the north of England alone to supply the UK needs for the next 40 years, Sweden having potential to produce 50% of its diesel needs from pulp mill black liquor derived DME, Volvo putting out a line of truck in the US to run on gas, the first industrial scale wood waste bio oil facility in Finland to replace heavy and light fuel oil ... roll on the energy revolution.

Though someone did tell me the sky could fall on our heads.

by Plutocracy | 18th Dec 13, 5:05pm 1387339554

For factual balance (for those who care about things like that):

1) USA oil production

From the very publication you make mention to, keyword: expected. They are not producing anywhere near this much oil currently. Also, as an aside the same publication you quote predicts US oil production to start declining by 2020. Isn't US set to become 'energy independent' forever by then!?

"US crude oil production is expected to approach the historical high achieved in 1970 of 9.6 million b/d through 2016, according to the US Energy Information Administration. However, crude oil production is expected to level off and then slowly decline after 2020."

2) UK Shale gas

Resources are the amount of resources in the ground. Reserves are the amount technically and economically recoverable. Your '40 years of gas' confuses resource for reserve. Just this year EIA said this:

"EIA estimated that the UK has a total shale gas resource of 623 tcf and a 'technically recoverable shale gas resource' of 26tcf"

Annual consumption in the UK is ~2.7 tcf. They have ten years worth of gas if they exploit (drill) their shale. Sounds (like US tight oil) like a real long-term prospect!!! Party on people.

by profile | 18th Dec 13, 6:34pm 1387344864

It is a report about the future so readers would assume word like “expected” would be included. Saying it is not factual is splitting hairs when the report clearly is about the future.

On the already happened front Texas has doubled oil production in the past 27 months. This is in the most exploited, prospected oil fields in the world. Also the report stated oil production has increased sharply. Check out this chart: http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?f=M&n=PET&s=MCRFPUS2

Yes it is expected to level off but the “slowly decline” bit still has the US production 8 million barrels/day in 2040 from a peak of 9.6 so not exactly panic stations. Though I am loathe to use the work peak. Also the 56% increase in natural gas will help.

The EIA figure you quote contradicts the BGS data for northern England. The BGS central England estimate ranges from 882-2281 tcf. Bit of gas there too. Who would have thought the Permian field in Texas would recently increase its extractable oil gas reserves to the equivalent of the last 90 years production? Try and imagine what will be technically possible in 2040 – party on!

by Plutocracy | 18th Dec 13, 8:09pm 1387350594

Did you even read anything I wrote? From the BGS which you are quoting:

The lower limit of the range is 822 tcf* and the upper limit is 2281 tcf, but the central estimate for the resource is 1329 tcf. This shale gas estimate is a resource figure (gas-in-place) and so represents the gas that we think is present, but not the gas that might be possible to extract.

I have bolded the line to help you. Read it twice for good measure. Resource doesn't NOT equal reserve.

High oil prices have enabled fracking to profitable produce oil, the technique been around since the 1950's and it more serves to show just how much prices have risen in the last decade. While the extra production is helping (ignoring AGW) it does not appear to be a long-term solution to our energy supply. Your unrelenting cornucopian views make me concerned that you do not consider the possibility that we may have less energy available in the future. Such an optimistic view will stymy any meanful attempt at possible mitigation. If we do face an energy decline in the future, your ilk will ensure we remain unprepared and make a transition as difficult as possible. Can we not hedge our bets instead?

by profile | 19th Dec 13, 12:25am 1387365923

You quoted that the EIA total resource for the UK were 623 tcf. I simply stated that the BGS resource for the central region alone being 800 to 2300 tcf appeared to contradict this especially with the additional northern resource excluded. Perhaps I should been more clear but no need to go all bold on me! The 40 year figure from the northern field came from the Telegraph article today.

The example of the impressive Permian field increase in recoverable oil and gas clearly demonstrates what is recoverable yesterday does not equate to what is recoverable today. Hence it is pointless to speculate what is recoverable tomorrow. Check out PDKs chart below for instance. Especially given mankinds track record of ingenuity and the last 100 years predictions that we are going to run out of ABCD and have been disproven time and again. We were supposed to have a population bomb now population will peak in my lifetime.

The examples of DME, bio oil, charcoal slurry etc. demonstrate I am not as close minded as you make out. Is this not hedging my bets? I know fracking has been around awhile so don’t really see what the big deal is. High oil prices suck but they are great for driving innovation. Check out what it has done for the gas price in the US.

by powerdownkiwi | 18th Dec 13, 7:29pm 1387348143

Profile - someone is grasping at straws. Nothing - and certainly not anything photosynthetically-derived - can replace oil and coal. Gas was always going to be there in the end-game, but not as a 'changer'.

http://www.peakoil.net/uhdsg/

playing out as predicted.

by profile | 19th Dec 13, 12:22am 1387365772

Take the US production by 2013 it looks like the oil and gas production was predicted to be around 1 billion barrels. Yet here we are today with oil alone at 3.5 billion. Then look at 2040 predicted to be zero but the report above expects it to 2.9 billion and that is without the gas which is expected to increase 56% from current levels by then. And none of this shale resource has been tapped into outside the US.

by Gareth Vaughan | 18th Dec 13, 2:48pm 1387331298

The Auckland Council meeting tomorrow should be a nice circus. Here's a press release from 5 councillors;

Auckland Councillors – Dick Quax, Linda Cooper, Cameron Brewer, Sharon Stewart, Denise Krum – Wednesday, 18 December 2013:

A quarter of Auckland Councillors have today signalled they will attempt to put a motion of no-confidence regarding the Mayor of Auckland at tomorrow’s 10am Governing Body meeting at the Auckland Town Hall.

The motion they will put to be debated and voted on reads: “That the Governing Body notes that Len Brown lacks the essential leadership credentials of judgement, honesty, integrity, and credibility and as a result councillors have lost confidence in his ability to carry out his duties as Mayor of Auckland.”

The five councillors, Quax, Cooper, Brewer, Stewart and Krum have advised other councillors of their intentions and are confident more will come on board over the next 24 hours to support this stronger statement.

by Boatman | 18th Dec 13, 4:44pm 1387338255

Good , Len Brown must go , he is a liabilitiy to Auckland , and poses a huge financial risk to both us and future generations of Aucklanders with his fnancially unviable, pie-in- sky ideas .

I am sure most right -thinking sensible ratepayers would agree

by Alter Ego | 18th Dec 13, 6:05pm 1387343134

Is it just me wondering, why Len Brown has 6 Spin specialists in his entourage and a budget of 4 million to do his simple job.

He is not a Government Minister is he.??

What the hell does anyone need 6 spin bowlers for, when underarm tactics are clearly being used. Awkland is not a suburb of Aussie yet...., or is it.??

It is a piddly little city, poorly designed and managed and over priced comparitively.

If everything was transparent as it should be, but obviously is not, then there should be nothing to hide. (Unless we are taking bribes from overseas invaders, perchance)

Having an entourage and the need for spin appears to me to be raising the entitled to a level greater, than the job entails.

He is a figure head, not withstanding and in my opinion a poor one, amalgamation or not.

Why does the job have a chauffer and an expense account, that any poor citizen would envy, be needed, when he could take a train, take a bus, take a taxi at any time and save you all a bundle. (And get a clearer idea of the problems, I might add)... I thought that was the point of the amalagamtion, to wipe em out??, not add to em.

I know you are all millionaires now in Awkland, the rates are a mere bagatelle.

(Though It appears to be full of people invited to come and sample the delights, the high-lights and trafficking and the bars and a bevy of easy lays, judging by the classifieds and the papers, but who am I to judge, more trouble than they are worth, but then, I am opinionated).

Maybe that is why the need for spin?. A difference of opinion. Seems his fellow officers have a different one. Now.

I am just a country hick, no need of all these type people around me.

That is why I could never live your lives in the big city.

( We have enough idiots of our own, in council, I can assure you, over rated and just as needy).

I can see just why some in Awkland would relish it though.

Big noters all seem to congregate together, I suppose that is the countries containment strategy?.

Just asking, but you Jaffas seem a little overcrowded with the entitled?.

And you want more of the same, why bother?

Move to Wellington, there are more spin doctors and the entitled, but you can get wind of em, easier, tis why it is called Windy Wellington.

by MortgageBelt | 18th Dec 13, 6:51pm 1387345886

Will John Key, Prime Minister, be tainted and negatively affected by his ardent support for Len Brown? John Key was brought in by Len Browns minders to have a "special meeting" with LB immediately after the Whale Oil revelations.

Who asked John Key to have the meeting with Len Brown? Why did JK publicly back LB?

Then recently, JK was asked about the LB affair. JK kept supporting the mayor. Was it to ensure the SkyCity deal was kept being supportive? Did LBs minders call in the PM for extra ammunition? Why can't the PM just be straight forward and say something is wrong?

There doesn't seem to be any inner guiding set of values or ethics from the PM. He just keeps a safe middle, non-commital line on every issue.

by Boatman | 18th Dec 13, 7:01pm 1387346465

Correct me if I am wrong but 2014 is an election year .

Len Brown won the mayoral election by a big margin

John Key was simply hedging his bets in supporting Brown .

John Key will change his tune now that Aucklanders are unanimous in saying Len Brown MUST GO

by Boatman | 18th Dec 13, 4:40pm 1387338013

Okay , you make a good point about the Greens , and they certainly have some good ideas , but the members that get elected are either too idealistic , a bit too ideological and impractical for my liking .

Everything is black or white , no room for compromise , and for them to succeed in their objectives , they would require a totalitarian state , a bit like Stalinists masquerading as environmentalists

In opposition , I see them more as an environmental watchdog and thats not a bad thing really .

by powerdownkiwi | 18th Dec 13, 7:22pm 1387347766

you a paid party hack, Boatman, or just one of those old-fashioned volunteers?

The problem is that the continued reliance on resources to underwrite 'economics' is a dead-end trip. Ask them to underwrite growth-based economics, and it's sooner rather than later.

To put society on a sustainable footing - meaning one which can be carries on for a long time - needs rules. Total and -at this point - global. Sure, it won't happen, .For every dumb consumer in the First World, theres ten wannabe's in the Third World, and they're not havng this debate. If they have it at the same stage we are, with as pathetic results, then all bets are off.

Including your wishful thinking ones.

Don't ever claim your weren't told :)

by Boatman | 18th Dec 13, 7:42pm 1387348925

FYI I dont belong to any Political Party , and never have , nor have I ever vounteered for one.

by steven | 18th Dec 13, 8:12pm 1387350731

Bank loses against Solid Energy

http://www.stuff.co.nz/business/industries/9531871/Appeal-against-Solid…