CSG Industry Mining the Share Markets

Various technical topics related to science, energy, climate change and coal & gas.

CSG Industry Mining the Share Markets

Postby HVPA_research » Sat Jan 02, 2010 11:36 am

During the last few years we have all heard a lot about the coal seam gas (CSG, also known as Coal Seam Methane CSM or Coal Bed Methane CBM). It was presented as a great green source of future energy for Australia and even more importantly for export as liquefied petroleum gas (LPG). Resource companies competed in purchasing CSG exploration licenses. A gas pipeline spanning like a rainbow the eastern coalfields from Newcastle to Gladstone was to deliver pots of gold for smart investors. Some of them ( see e.g. here and here) already made a lot of money on the share markets and from takeovers. It was all good news while it lasted. Unfortunately, the picture is not so rosy right now - some finance writers are starting to question the very foundations of this new industry. For example, Adele Ferguson from Sydney Morning Herald thinks that Hard decisions must be made if they want the big bucks.

But now the clock is ticking for the industry to turn rhetoric into reality and start making some financial investment decisions (FIDs). The brutal reality is that not one CSG-to-LNG venture has decided on projects in Queensland's Gladstone region. Five FIDs worth more than $60 billion need to be made in the next year, as concerns grow of too much capacity fighting for market.

A new complication is the regulatory cost related to environmental issues. Until recently, CSG was seen as nature-friendly energy. But farmers and green campaigners are concerned about potential damage to waterways and crop land and the impact that the disposal of salt produced during the extraction process will have.

Until recently, water extracted during the process was pumped into ponds where it would evaporate. But the Queensland Government has frowned on the technique for creating salt ponds, forcing such companies as Santos to search for other solutions.

We are going to have an interesting year!

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