Australian Bankruptcies

[Value Collector]

Queensland coal seam gas:

Total discovered technically recoverable gas = 66,955 PJ

LNG plant requirements over 30 years at full capacity = ~47,000 PJ.

Queensland domestic use over 30 years = 9400 PJ

All looks OK then?

Trouble is the detail with 25,300 PJ of that gas being uneconomic to extract according to the data provided to government. That cuts the total available to 41,665 PJ of which about 15,170 PJ has been extracted thus far with 26,495 PJ left to extract, presently being extracted at a rate of 1550 PJ per annum.

Those figures are all from Geoscience Australia (Government) ultimately sourced from the industry. Plus I've added in actual production since publication of those figures.

There's also the diversion of gas from Qld to other states via Moomba which adds to demand on Qld reserves. Doable at present but it relies on the "excess gas" being available in Queensland.

I'll leave others to add the numbers up there, based on whatever assumptions you choose, but suffice to say there's a reason for all the posturing going on. It's a game of musical chairs and nobody wants to lose.

A key issue there is timing and that shareholders and energy planners take a radically different view there. Shareholders and company boards might be thinking of their own investment horizon or their own tenure with that company and looking 5 or 10 years ahead. Energy planners and contract negotiators however are looking very much further ahead, in some cases through to the 2070's, and that explains the different perspectives. Nobody on that side is looking a year or two ahead, not when they're making 30+ year commitments to plant that requires gas to operate.

This chart sums up the overall position across all eastern states (including SA) including gas demand for export:

View attachment 170700

Source = ACCC

The "excess gas" referred to is simply that above the red line, above the contracted LNG exports. Noting that according to the LNG producers themselves, that uncontracted volume is negative from 2029 onwards. Or in simple terms supply falls short of demand. This doesn't change the physical need to send gas from Qld to Moomba to meet southern demand.

Putting the details aside, it's pretty straightforward and this is the bit of relevance to the thread. Australian buyers of gas, those wanting volumes that are above retail quantities (eg power generation, heavy industry) are finding it extremely difficult to do so. They issue a tender and these days it's pretty common to receive very few offers to supply at all, and none at an acceptable price. That's the issue of relevance to gas consuming businesses and the thread subject - the inability to obtain gas at a suitable price or even at all. All the rest, the reasons why, are really just background detail in that sense but it's price and availability, or the lack of it, that counts.

Those trying to contract gas beyond 2028, that is take volume away from the contracted exports, are finding it very hard to do so at all, and even harder to do it at an economical price. That's the crux of it. Even harder for those trying to get contracts running well into the future.

firstly in 30 years gas demand might be falling off a cliff or already dead.

But, We have Beetaloo being connected to the grid soon too, and more will be discovered in Queensland, PNG is also possible in the future.

its a bit like how in 1995 my science text book said we had 30 years of oil left, now 29 years later we have 30 years of oil left.

 

[Smurf1976]

But, We have Beetaloo being connected to the grid soon too, and more will be discovered in Queensland, PNG is also possible in the future.

The key however, noting the thread is bankruptcies not geology, is the ability to get this tied down contractually.

A company that wants to build new industrial plant is looking to secure firm contracts for key inputs before committing. So they need someone to be willing to sign contracts to supply gas (as well as other things of course).

That's where it's coming unstuck and leading to industry either not establishing or shutting down existing production, that's the point I'm responding to here. Company XYZ tries to get a new gas contract, either for new or existing plant, and comes back either with no offers at all or with offers that are uncompetitive internationally on price. It's a well known problem in the industry, and one the ACCC has released some information about publicly.

A practical example of all this is the Gibson Island (Brisbane) fertilizer plant. It closed directly as a result of Incitec Pivot being unable to obtain a suitably priced supply of natural gas. That's a direct example of the issue here, and it certainly isn't the only one. The proposed conversion of that facility to hydrogen from electrolysis is also running into some difficulties with energy, in this case electricity, pricing as has been publicly acknowledged. So two paths to the same end and both running into essentially the same problem.

The geology etc is really just background as to how we got to that point.

 

[mullokintyre]

Geez you blokes, take it to one of the 8,000 threads about gas and energy.
This is the bankruptcies thread.
And sticking to the topic, was talking to a person in the building game who has not been paid by Fletchers Building group.
He is saying the word on the street is they are in deep dodo.
Mick

 

[divs4ever]

Geez you blokes, take it to one of the 8,000 threads about gas and energy.
This is the bankruptcies thread.
And sticking to the topic, was talking to a person in the building game who has not been paid by Fletchers Building group.
He is saying the word on the street is they are in deep dodo.
Mick

well there is a meeting tomorrow ( at FBU ) and there might be some big news ( will it be better than expected , or worse )

i guess we will find out Wednesday when they post the results

 

[TimeISmoney]

let's not forget that one of the key cause is the prevention when not legal prohibition of any new search let alone exploitation of new resources...Australia joining the bird brain movement leaded by the West..
With the same attitude, all oil would have been burnt by the 1980s...
Reserves are not static until you stop looking

I worked for a drilling company that was exploration drilling for coal at the time, the gas is everywhere where you find coal. The crew that I worked with didn't cap a few boreholes on the job before and the gas killed all the farmer's cows. Even when you're drilling you sometimes hit big pockets of gas, other times it takes a while for it to seep into the drill holes a few days later. It does screw up the water tables, so not too good if you want to farm nearby and need an underground water source.

 

[mullokintyre]

Poor sentiment from consumers facing the worst cost of living crisis in decades is putting businesses under pressure and the value of orders are tumbling to a record low.

From the Evil Murdoch press

CreditorWatch says that the situation is likely to worsen throughout 2024 because business and consumer confidence is subdued while input costs are elevated.

This is likely to result in insolvencies climbing in the coming months and businesses in Sydney’s southwest and in southeast Queensland are the most at risk.

The CreditorWatch Business Watch Index showed that the average value of invoices was down 19 per cent to just under $150,000 in January compared with the same period in 2023. Volumes have now halved from $300,000 in early 2021.

The Australian Bureau of Statistics reported in the past fortnight that retail turnover fell 2.7 per cent in December – the sharpest decline since the introduction of the GST in 2000 once the pandemic-era fall of 4.2 per cent in August 2020 is excluded.

CreditorWatch chief executive Patrick Coghlan said the deterioration in trading conditions indicated 2024 would be an extremely challenging year for Australian businesses.

“The retail trade numbers for December clearly showed that interest rate increases and high inflation are now exerting a huge amount of pressure on households, which translate to lower demand for goods and services,” he said.

“Our hope is that interest rate relief arrives sooner rather than later to ease cost-of-living pressures and stimulate demand.”
In a worrying sign for the economy, CreditorWatch noted that business to business trade payment defaults were at an elevated level for January, and are 55 per cent higher than January 2023. CreditorWatch noted that it meant businesses are becoming increasingly impatient with late payments, and are taking action by lodging payment defaults against these late payers.

It expected that the decision by the Federal government to make it harder for foreigners to study in Australia to add further pressure on retailers and hospitality outfits who have been the hardest hit by the cost of living crunch.

“Fewer international students will hurt the retail and food and beverage sectors, as these two sectors benefit greatly from population growth, not to mention the access to more labour,” CreditorWatch chief economist Anneke Thompson said.

“Both of these sectors are already grappling with falling demand and spend.”

Accommodation and food services recorded the fastest rate of insolvency of any sector in the December quarter, according to the Australian Securities and Investments Commission. It is up 92.4 per cent to 504 from the same period in 2022, while retail trade increased 40 per cent.

The regions with the highest levels of insolvencies tend to have very young populations, where discretionary spending among the population will have been hugely impacted by rising interest rates.

The top three were located in NSW where Merrylands-Guildford, Bringelly-Green Valley and Canterbury all have projected rates of insolvencies above 7.5 per cent.

Queensland was high on the index where Ormeau and Surfers Paradise were the fourth and fifth most at-risk suburbs with the risk of default at 7.4 per cent in the coming 12 months.

 

[Value Hunter]

I feel there are many non-viable small businesses which are around due to unemployment (or lack of adequately paid employment). Certain people that cannot get a job or cannot get a decently paid job decide to risk it and start a small business where they are out of their depth and then they fail.

I feel if we kept a strong job market we would see less of these non-viable small businesses being started. The way in Australia to get a stronger job market with lower unemployment and higher wages would be keeping a lid on immigration (it just pushes down wages and pushes up unemployment) as well as incentivizing business investment.

For example in terms of incentivizing business investment:
KPMG:
"In Estonia, corporate income tax is not levied when profit is earned but when it is distributed. In 2021, the standard tax rate is 20% (calculated as 20/80 of the net distribution)."
But unfortunately some low IQ politicians in Estonia will change (worsen) the corporate tax laws in Estonia with changes to take effect from 2025.

 

[Value Hunter]

When I see some of the brilliant policies in smaller countries like Estonia or El Salvador I shake my head at the collection of low IQ policies present in Australia, whether it is regarding immigration or tax, or crypto currency regulation or a range of other factors we really are incredibly woefully managed in Australia. And over time the direction of policy in Australia seems to get dumber and dumber. Like the 2023 changes to franking credits in Australia.

 

[mullokintyre]

Another Builder going to builders heaven
From Evil Muroch Press

A family-owned home builder that has been providing affordable housing for three decades and gone into voluntary administration, unable to work through a series of blows affecting the sector.
Cubitt’s Granny Flats and Home Extensions had been building homes in NSW and the ACT since 1994 and is seeking a buyer for the business.

On Tuesday the Cubitt family said it has “suffered more than it can shoulder” because of bank lending conditions, supply prices, taxation changes, insurance prices, covid recovery and lengthy weather events.

“Cubitt’s made the decision in 2021 to honour fixed price contracts and not pass on price rises to their customers, bridging the shortfall and completing projects with significant loans to the company by the owners, Ian Cubitt, Kim Cubitt and Kate Cubitt, using their personal assets,” they said.

The family said they were unable to bridge the gap entirely and the directors had to make the “devastating decision” to appoint Richard Stone and Brett Lord from RSM Australia Partners as administrators for the parent company – Ian Cubitt’s Classic Home Improvements Pty Ltd.

Mick

 

[Value Collector]

I feel there are many non-viable small businesses which are around due to unemployment (or lack of adequately paid employment). Certain people that cannot get a job or cannot get a decently paid job decide to risk it and start a small business where they are out of their depth and then they fail.

I feel if we kept a strong job market we would see less of these non-viable small businesses being started. The way in Australia to get a stronger job market with lower unemployment and higher wages would be keeping a lid on immigration (it just pushes down wages and pushes up unemployment) as well as incentivizing business investment.

For example in terms of incentivizing business investment:
KPMG:
"In Estonia, corporate income tax is not levied when profit is earned but when it is distributed. In 2021, the standard tax rate is 20% (calculated as 20/80 of the net distribution)."
But unfortunately some low IQ politicians in Estonia will change (worsen) the corporate tax laws in Estonia with changes to take effect from 2025.

I look at it slightly differently, in a country as vast as Australia, I don’t see a larger population as being a cause of unemployment, I see a lack of capital being invested in ways that generate employment as being the problem.

I mean in 1992 we had an unemployment rate nearly 3 times higher, but we had 10 million less people.

Not to mention that there is places like California that are a fraction of the size of Australia, but have a population much larger than Australia, yet have quite low unemployment.

——————————————
the question is “Has Australia reached its peak of possible economic and business development?” Eg can no more farms, factories, tourism developments, service businesses, etc etc be formed to absorb labour.

I believe we are no where near our peak, we could possibly fit another 10 Sydney’s at least. So until that happens it’s not an over supply of labour that is the issue, it’s an under supply of effective capital. And possibly an under supply of skilled labour.

 

[Value Collector]

The end scene/speech from other peoples money. It points out the benefits of realising your company is dead before your company is broke.

 

[Value Hunter]

I look at it slightly differently, in a country as vast as Australia, I don’t see a larger population as being a cause of unemployment, I see a lack of capital being invested in ways that generate employment as being the problem.

I mean in 1992 we had an unemployment rate nearly 3 times higher, but we had 10 million less people.

Not to mention that there is places like California that are a fraction of the size of Australia, but have a population much larger than Australia, yet have quite low unemployment.

——————————————
the question is “Has Australia reached its peak of possible economic and business development?” Eg can no more farms, factories, tourism developments, service businesses, etc etc be formed to absorb labour.

I believe we are no where near our peak, we could possibly fit another 10 Sydney’s at least. So until that happens it’s not an over supply of labour that is the issue, it’s an under supply of effective capital. And possibly an under supply of skilled labour.

Your argument is fallacious because labour supply is only half the story affecting unemployment. The other factor is demand for labour. Obviously demand for labour increases over time in a growing economy, but my point is that all things being equal unemployment would be lower than what it is now if stopped the migration and work and holiday visas etc. We saw that during the COVID period after the lockdowns ended but before they reopened the border. That was a golden period were unemployment was rapidly dropping. Sure if unemployment gets to 1% and companies literally cannot find people to work then start importing labour but we are not at that point. We have a vast labour surplus.

I have already refuted your argument in another thread that there is an under supply of skilled labour at least when you look at any industry categories in aggregate none of them have wages increasing faster than inflation therefore by definition no undersupply. Are there a small number of professions that are under-supplied? Yes of course, but in no way is it a systemic issue. The systemic issue we are facing is labour overupply.

Sure if you increase demand for labour by creating a business/investment friendly environment and then unemployment gets to rock bottom levels of 1 or 2% then sure you can think about importing some labour. But at the moment all we are doing is increasing the supply of labour without doing much to increase demand hence unemployment continues to rise.

I agree with you that lack of capital invested is the problem but my point is that importing labour only exacerbates the problem. For the current amount of capital invested in the country we are oversupplied with labour. If more capital gets invested and unemployment drops precipitously your argument would have some validity. But at this point in time it does not.

 

[Value Collector]

Your argument is fallacious because labour supply is only half the story affecting unemployment. The other factor is demand for labour. Obviously demand for labour increases over time in a growing economy, but my point is that all things being equal unemployment would be lower than what it is now if stopped the migration and work and holiday visas etc. We saw that during the COVID period after the lockdowns ended but before they reopened the border. That was a golden period were unemployment was rapidly dropping. Sure if unemployment gets to 1% and companies literally cannot find people to work then start importing labour but we are not at that point. We have a vast labour surplus.

I have already refuted your argument in another thread that there is an under supply of skilled labour at least when you look at any industry categories in aggregate none of them have wages increasing faster than inflation therefore by definition no undersupply. Are there a small number of professions that are under-supplied? Yes of course, but in no way is it a systemic issue. The systemic issue we are facing is labour overupply.

Sure if you increase demand for labour by creating a business/investment friendly environment and then unemployment gets to rock bottom levels of 1 or 2% then sure you can think about importing some labour. But at the moment all we are doing is increasing the supply of labour without doing much to increase demand hence unemployment continues to rise.

I agree with you that lack of capital invested is the problem but my point is that importing labour only exacerbates the problem. For the current amount of capital invested in the country we are oversupplied with labour. If more capital gets invested and unemployment drops precipitously your argument would have some validity. But at this point in time it does not.

Demand for labour increases as more capital is invested, that was my point. But you also need a certain amount of skilled labour, hence why we need to import some labour. There is a limit to how much capital you can deploy without the skills to build or run it.

With our local birth rate, we have an aging and shrinking working population.

Did you know the average age of farmers in Australia is 63, in 1990 it was 53.

—————————

 

[tech/a]

In My view, we have enough Barristas, Uber Drivers, Truck Drivers, Cleaners, Trolley Collectors and Pizza Delivery drivers.
A host of these people have degrees not recognized in Australia, which means they can't fill the spots needed
Like Doctors, Nurses, Engineers, Vets, Vet Nurses, Management roles. Middle management roles. etc etc,

Quality NOT quantity.

 

[Dona Ferentes]

everyone should do a paper round when young.

 

[divs4ever]

everyone should do a paper round when young.

i had 5 , not counting the seasonal appearances at the Royal show

you can keep your calculus , give me money !

( cold , hard cash ... or gold )

 

[Value Collector]

In My view, we have enough Barristas, Uber Drivers, Truck Drivers, Cleaners, Trolley Collectors and Pizza Delivery drivers.

Do we though?

In my area heaps of hospitality businesses have signs up saying they are looking for staff. The local pizza shop is looking for drivers too.

there is also a truck driver shortage and a shortage of cleaners.


Labour shortages hit hospitality

 

[Value Collector]

everyone should do a paper round when young.

It worked for me, it funded my first 100 CBA shares, all the way back in 1996, those shares with reinvested dividends are worth over $65,000 today.

I still have the original Pass book showing the day I closed the old passbook account and purchased the shares. before that I had invested in term deposits, but this cba purchase sent me on my way .

 

[sptrawler]

Do we though?

In my area heaps of hospitality businesses have signs up saying they are looking for staff. The local pizza shop is looking for drivers too.

there is also a truck driver shortage and a shortage of cleaners.


Labour shortages hit hospitaView attachment 171750

Maybe normal people can't afford to live in your area, therefore low paying work that you mentioned, couldn't attract the workers required.
The businesses should advertise at the nearest university, there will be plenty of graduates looking for work.

 

[mullokintyre]

Exactly.
If the workers cannot find accomodation, then it matters little how good the wages are.
Mick