esg management - post-script

There are some things I am critical of ESG for, and some things that were out of their control.

Here is a list of some of the parties who have created major problems for ESG and their reserves growth:

- The Kenneally Government - stalling on approvals. No approvals, no Tintsfield; no Tinsfield, no reserves growth from their third seam.

- The Current BOF Government. A moratorium on CSG drilling??? Hardly the support for a new industry. Approvals required just to do workovers on existing pilots. What a joke

- Kevin Rudd and The Mining Tax. Not helpful when trying to prove up a market. Even the compromise PRRT applying to CSG is an extra impost.

- The Federal Greens. Want Coal-fired power decomissioned yesterday, but somehow imagine that baseload power can be replaced by mythical fuel sources. Their opposition to CSG has been very unhelpful.

- Farmer Oppostion. Most people on the land welcome the extra income and the regional development. But it is always the squeaky wheels that get the oil. Opposition to the Wellington pipeline has held up ESG commercialising their gas and booking reserves.

- 1/100 Year floods. Yet another reason why ESG couldn't grow their reserves much in the past 18 months.

- Delays to and Opposition to the Carbon Tax - if we had the Carbon tax in late 2009, a green light would have been given to investment in gas-fired power. But all these investments have been put on hold. Get the certainty on carbon, you get the domestic deals signed and hence the large 2P reserves. Delays here have meant no one could commit to a GSA.


Yes, I am very critical of ESG's communication and some of the sneakiness in what they have said. There are no excuses for not being complete frank with shareholders.

But in the end, ESG haven't got more money because they haven't been able to progress their reserves much. You prove up the reserves, and you can demand more money. It is simple as that. And if major hurdles to running pilots and drilling your field and approving an LNG project remain in place, a small company like ESG just isn't going to be able to make much headway.

Let the Majors throw their weight around with approvals and the various intransigent Governments.

ESG wanted the big reserves and the big payday as much as the rest of us. But other parties have made that virtually impossible. The metric with Santos is in line with previous transactions. The problem is the lack of reserves progress, not the price.

Yaq