An article in today’s AFR covers the potential $50B boom in the Queensland coal seam gas sector.
According to Santos, Queensland‘s CSG fields host resource potential of more than 250 trillion cubic feet, the equivalent of more than 400 years gas supply to eastern Australia.
The idea of such large reserves on the doorstep of the huge growth market that is Asia, in a politically stable country like Australia, has been too good for energy majors.
In the past 12 months, entry of major International companies Conoco Phillips, Petronas and Britain’s BG, through buyouts and linkups, have reduced number of local pioneer companies involved. These 3 majors are complemented by the Arrow Energy/Shell group. Long term growth projections all point to the new arrivals all being in the right place for future market growth
Of all the majors Royal Dutch Shell, with its 30% stake in Arrow Energy, has the least foothold at present. Shell is currently investigating the potential for a multitrain LNG project at Curtis Island; Shell has apparently the greatest need for more involvement.
Many of the international companies involved are also working together on LNG projects in other parts of the world. This strengthens the case for the consolidation required to bring the large capital costs involved down.
With the active encouragement of the Queensland Govt, land on the south-western tip of Curtis Island in Gladstone harbour has been set aside for LNG processing plants. Then there is the Liquefied Natural Gas company's proposed plant on Fisherman's Landing, opposite Curtis Island. Arrow Energy has signed heads of agreement to provide gas to this facility.
The Queensland Govt has setup an LNG unit within the Department of Infrastructure to streamline the applications process for the big industry players.
The Queensland Govt is also commited to allocate $30m to a ‘gas superhighway’, a 100 km long corridor, between Callide and Gladstone, that companies will use for their pipelines from the Bowen basin.
Unfortunately, while the long term story sounds strong, the players are negotiating in the market now; with the past 12 months of turmoil in financial markets there are many voices decrying the prospects of CSG investment at present.
JP Morgan and UBS analysts remain doubtful about future sales from the Gladstone LNG projects; also they project current share prices, especially for the local players are too high.
Against this is the off-take contract announcement from the BG group that they are to supply the Chinese CNOOC group with 3.6 M tones of LNG/year for 20 years. Obviously this is a big fillip for the future of Queensland‘s CSG.
