bow takeover, page-11

The other point about the BOW takeover offer is that the political opposition to CSG is not deterring acquisitions in the CSG sector.

If there are issues with farmers and land access, that increases the pressure on majors to have more than enough gas and a diversity of supply. It also increases the value of gas holdings that are not underneath farming land.

ESG has a considerable resources and reserves under the Pilliga. And importantly, a land access agreement with the NSW Government.

Look at BG:

- they are having trouble in QLD with farmers and land access issues, (Santos have less trouble in this regard).
- BG admit they are behind where they are hoping to be in terms of reserves growth, due to the floods
- BG missed out on the larger ORG reserves
- BG do not have a diversity of supply (which Santos have)
- and yet BG are marketing to sell supply for a 3rd Train, without the gas for a 3rd train..?

So the question is, if BOW does fall to Shell, where would that leave a major like BG? Large sunk costs, inadequate reserves, non-diversified supplies, and a 11% return (and falling) on a two train project getting their margins squeezed by rising gas prices, with the extra impost of the Carbon and Mining taxes.

> Getting a third train and extra gas becomes even more important than ever for BG.

And if ESG fell to Santos, where does that leave ORG in NSW?

- Good reserves in QLD, but not enough gas once you subtract the reserves that will be exporters as LNG
- Already invested in retail in NSW, but without reserves in NSW
- Gas-fired power industry about to boom, tripling according to Santos
- domestic gas prices to rise, so an even greater imperative to own the gas at source.


Yaq