http://business.timesonline.co.uk/tol/business/industry_sectors/n...

http://business.timesonline.co.uk/tol/business/industry_sectors/natural_resources/article4036235.ece

"BG, the biggest gas trader, was the first big energy group to move, signing a joint venture in April with Queensland Gas Company (QGC), the third-biggest coal-seam gas producer, to build an LNG plant. Less than a month later it bid A$12.9 billion for Origin Energy, the sector's leading company.

Two days ago, Petronas of Malaysia, the world's third-biggest LNG producer, joined the fray by paying US$2.5 billion (£1.27 billion) for a 40 per cent stake in the coal-seam gas operations and planned LNG plant of Santos, Australia's No 3 oil and gas producer.

Yesterday, Arrow Energy the fourth-largest producer was in a trading halt as energy majors, rumoured to include Shell, circled. Analysts say that BP, ENI and Total are interested.

Thanks in part to BG's tilt at Origin, the market has finally recognised that the Australian continent is of a similar size to the US, but with gas domestic consumption of just 0.5 per cent of the bigger economy. Coal-seam gas supplies about 18 per cent of the eastern Australian gas market but the domestic market is tiny and production increased 44 per cent last year.

In Asia-Pacific alone, annual LNG demand is expected to double from 100 million tonnes to almost 200 million tonnes a year by 2015. Additionally, the booming markets of Asia are a relatively short journey away by sea.

But some analysts say the prospect of Gladstone becoming a hub for LNG exports into Asia-Pacific are not yeat clear-cut as no one has built an LNG plant fed by coal-seam gas.

Richard Cottee, QGC chief executive, says there are uncertainties but says his company has “cracked the code” to key technological barriers in drawing the gas from coal. His company and more than a dozen others have already succeeded where BP and Amoco failed in the Nineties. Conventional gas is caught between grains of rock such as sandstone.

But 70 per cent of the gas is between the molecules of coal and only 30 per cent in the gaps. So while BHP and Anglo Coal are producing coal-seam gas, albeit at small levels, most of the majors have pursued it using conventional methods and, as a result, have harvested only 30percent of the potential".