Coal seam gas gains traction in energy mix
JUST a decade or so ago, coal seam gas was seen as a niche industry, something that — if it proved viable — might top up Australia’s energy mix. Look at it now. Coal seam gas, the clean form of energy also known as coalbed methane gas, is to be cooled to provide feedstock for a new liquefied gas industry in Queensland. Its impact on electricity generation there will be considerable.
Australia may not be the biggest player in the coal seam gas business, but it is certainly one of the most spirited and advanced. Not only has Australia’s development of coal seam gas soared but the sector is now moving into downstream applications of this clean energy source.
For years it was known only as an oil and conventional gas explorer and producer, but Santos has reinvented itself to now be one of the big coal seam gas players. Earlier this month, it let the first engineering contracts for its proposed $ 7.7 billion Gladstone LNG plant which will process and cool the coal seam gas into the liquefied product for export to Japan, China and South Korea.
Santos has a large coal seam gas footprint in the Surat/ Bowen basins. Last year it budgeted $ 150 million to exploration. . It has the producing Scotia coal seam field and the LNG plant will source most of its gas from coal seams at the Fairview project located north of Roma.
There are three other projects announced for Gladstone that plan to produce LNG from coal seam gas.
Two locally listed companies, Arrow Energy and Liquefied Natural Gas, have one of those projects. In late March, the two companies signed an agreement to search for CSG- LNG projects in Queensland, NSW and South- East Asia. This comes on top of their agreement to build what they call the Fisherman’s Landing LNG project in Gladstone using coal seam gas from Arrow’s existing tenements.
Sunshine Gas has just raised $ 44 million to commercialise its Lacerta coal seam gas project north of Roma and will make a decision on its Gladstone LNG plant by the end of this year.
The fourth player is Queensland Gas, which, with London- listed gas giant BG Group, is planning to build a ‘‘ world scale LNG plant’’ at Gladstone using coal seam gas. Queensland Gas will supply 190 petajoules a year from its tenements in the Surat Basin to feed the plant.
Queensland Gas has also just moved to increase its interest in coal seam gas in Queensland by purchasing a 7 per cent stake in Victoria Petroleum, which is a partner with Bow Energy in the Don Juan coalbed methane hunt located next to Sunshine’s Lacerta field.
Overseas players are now eyeing the area. One is India’s Petronet LNG, which says it would be interested in acquiring CSG projects to put its foot on resources of between 7 trillion and 15 trillion cubic feet with stakes anywhere between 5 per cent and 10 per cent in individual projects.
But NSW might also be a great beneficiary of the coal seam gas riches of the Bowen Basin. A Hunter Valley businessman has put together a consortium to build a 820km- long pipeline from Roma into Newcastle, with the potential for towns along its route to tap the gas.
Not that the search for coal seam gas reserves in NSW is slackening in any way.
The coal seams of the Illawarra region are seen as a source of enough gas to support a small, peak- load power station for the region.
In another development, one of the state’s biggest players, Eastern Star Gas, announced it was launching what it claimed to be the NSW’s largest ever coal seam gas appraisal program in partnership with Houston- based Gastar Exploration near Narrabri. Eastern Star needs to lift its resource to fill its potential sales commitments into the Sydney- Newcastle market and also for power generation.
The other players include Metgasco, whose project is located 70km south of Coolangatta. The company has signed a deal to supply the BP refinery in Brisbane, whose present sole source of gas comes in on the Roma to Brisbane pipeline.
One of the lesser known coal seam gas players is A J Lucas which is listed on the Australian Securities Exchange industrial board. The company owns 70 per cent of a coal seam gas in Gloucester Basin ( just 100km from Sydney) as well as holding a 15 per cent stake in Sydney Gas, which has a large coal seam position around the NSW capital.
New areas are being opened up to coal seam gas exploration. One such area is South Australia’s Arckaringa Basin, which runs southward from Oodnadatta almost as far as Tarcoola, the junction of the Trans Australia and Darwin railways.
No seismic work has been done in this basin since the 1980s. Now Sapex, which listed last year, is picking up on work carried out by Santos and Delhi Petroleum. It had shown the potential for coal seam gas and conventional gas as well as oil. The junior has also brought on board the NSW coal seam gas specialist Eastern Star Gas, to help get work rolling.
Sapex says in two exploration licence areas there is potential for 5.7 billion tonnes of sub- bituminous coal, capable of yielding as much as 3 trillion cubic feet of gas.
Reinvention: Santos’s CSG project