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Stand-by for take off
Patrick C
12 Jan 2010 5:49 PM
Stephen,
You left out NSW's largest CSG company of which Santos owns almost 20 per cent. (See A pivotal year for coal-seam gas, January 11).
Eastern Star Gas is about to reveal their newly booked reserves in which they are touting as having a worldwide resource. As you rightly said, CSG is about to take off.
Mind the gap
Tim Wootton
16 Nov 2009 2:55 PM
The decision by Anna Bligh to not require a 20 per cent reservation of gas for future domestic use has a significant impact on the CSG LNG developments out of Gladstone but not a word out of Business Spectator. This is a significant gap
A right to be angry
Don Gilbert
20 Aug 2009 8:28 AM
JK's commentary regarding Gorgon was much better than my earlier posting. (Too early to tell, Conversation contribution, August 19.)
As conveyed in that commentary and by many other postings, by many other people on Business Spectator, we have a right to get angry. Very bloody angry. JK makes the point of how Norway has unashamedly put its efforts to work for the benefit of the Norwegian people.
This country has built up and gathered some of the best commercial and economic minds, yet the 'Flat Earth Society' presided over by the bureaucracy and who advise government must be repeatedly highjacking good common sense and commercial outcomes for Australia. Why can we not put the due care we put into our sport into commerce and economics?
Instead there seems to be every effort to become the last bastion of communism cloaked under 'Free Enterprise' so that there is more bureaucracy and centralist control; minimum wages rewarding people for no effort (productivity); more barriers/cost of being able to get rid of hopeless staff; every effort to monopolise every industry; blatant bloody feudalism; no effort to put simple legislation in place to enable markets to work.
Either that, or because these people are so far removed from real commerce and economics they do not get the picture.
The end.
Peak oil, peak problem
Barry White
20 Aug 2009 8:02 AM
Robert,
Your attitude to the contract worries me because I think your position is very common amongst economists. No one seems to be asking why China is rushing around the world buying up future production of oil and gas. It is becoming clear that peak oil occurred last year. (See What Gorgon means for Australia, August 19.)
We have a lot of gas, but don't you think we will need it to power Australia when oil goes into steep depletion. I suggest you read the latest update from the IEA. Existing fields are depleting twice as fast as the IEA had previously believed.
What's lurking beneath the surface at Gorgon
Ken Wan
19 Aug 2009 8:57 PM
Yes, on the surface the $30 billion Gorgon project is a triumph for Australia. But really, how much is it going to impact the ordinary Australian? (See What Gorgon means for Australia, August 19.)
The bulk of the $30 billion will be spent on building various pipes, tanks and processing equipment in countries other than Australia. Due to recent innovations such as modularisation, which means the 15Mt LNG plant will be built in smaller individual modules overseas (where labour is cheaper) and then brought to Australia and assembled, Australia will see only a small portion of the $30 billion of capital to be sunk in the project.
The enormous 15Mt per year LNG plant won’t even be located on the Australian mainland rather it will be situated on a small island off the shore of the mainland at Barrow Island. The ordinary Australian would probably never even get to see Australia's largest engineering project.
Most of the benefit to the Australian public of the Gorgon project would be in the form of taxes that the Australian government will receive from the project. That is, corporate taxes of 30 per cent and the resource rent tax that the Gorgon project will have to pay.
Even so, due to the massive capital cost of the project and therefore the deductions, that the Gorgon project will be entitled to, the project partners Chevron, Exxon Mobil and Shell (note the lack of an Australian presence as well in the equity interest of the project) will likely not have to pay any resource rent tax until late in the next decade at the earliest.
To maximise the benefit of the Gorgon project to the Australian public, the Australian government should mandate that a percentage, say 80 per cent of the capital cost must be spent in Australia and that a percentage, say 80 per cent again of employees working on the project must be Australian. The Gorgon gas fields are a precious inheritance of the Australian people and the government should ensure that every effort is made to maximise the value of that inheritance instead of allowing the leakage of jobs and dollars overseas.
A hazy valuation
Daniel Magasanik, McLennan Magasanik Associates
19 Aug 2009 2:18 PM
The "chunk of it", ie, coal seam methane, that we use here will be determined by the economics of its use, in turn determined by any CPRS, MRET, costs of CCS and other factors. Not least among other factors is the price of crude oil and this will largely determine the value of LNG. So, what do you mean by "a world that understands its value"?
(See Santos' French connection, August 19.)
Too early to tell
JK
19 Aug 2009 1:02 PM
I think it is very early days to determine whether this is a good deal for Australia. (See What Gorgon means for Australia, August 19.)
I note the following:
1) There is no mention of Australian equity participation in the project – why not?
2) The pricing structure for the gas has not been discussed. If it is similar to the outcome that Woodside obtained after being (reportedly) pressured by the Howard government then we know it will be bad for Australia;
3) This may be just another way for China to offload its depreciating USDs for real assets in order to gain cheap overseas assets and also to keep its own currency artificially low so that it can continue to generate more foreign exchange from manufactured sports at the expense of USA/Europe/Australia etc;
4) It is not clear how much of that $50 billion will go to the Australian and WA governments. The tax rate of 30 per cent on profits is low and there needs to be an explanation of what royalties etc will go to governments;
5) The employment effect will be much less once than 6000 once the facilities are built and again it is not clear whether overseas workers will get a large chunk of the work on so called temp (or permanent) arrangements;
6) The deal needs to be compared with what Norway and others gets for their gas, and funds should be set aside by govt from the project (like Norway does) in a wealth fund to ensure that the benefits flow to future generations as this is a non-renewable resource;
7) Much of the cost relates to capital expenditure items will involve importation and so the net benefits to Australia are much less, with a significant further lessening of the benefits due to profits being repatriated overseas;
8) the negative exchange rate potential from this needs to be addressed at it will just further destroy our industry.
Getting more miles out of our gas
Michael Niddrie
19 Aug 2009 1:01 PM
I agree entirely but please do not forget the powerful key points made by Prof. Laurie Sparke OAM in his keynote address in November 2008 to the Automobile Industry entitled
"The Australian Auto Industry 2020: Career Opportunity or Catastrophe?" in which simply he states that we should convert all our motor vehicles to natural gas, cash for gas not cash for clunkers maybe! Look at the obvious greenhouse and national economy benefits, may be just too simple for the pollies to get their head around and focused on but please dont give up your subtle push and shove tactics.
Coal-seam not-so clean
Hunter Valley Protection Alliance
14 Jul 2009 10:28 PM
This article is spot on! (See A monumental failing, July 14.) In fact the situation is much worse. The coal seam methane industry presents the gas as a clean and green energy of the future. In fact there is a huge downside. Nobody knows what to do with gigalitres of toxic salty water which is a necessary by-product of the CSG extraction. Current solution is to leave the waste water in huge evaporation ponds! Nobody asked the residents of the Hunter Valley if they want to live in a gas field. We don't!
For more www.huntervalleyprotectionalliance.com/.
A disposal disaster?
Robert Corbett
22 Jun 2009 12:01 PM
CSG production in Queensland is reliant on pumping underground water to reduce pressure and allow gas to flow to the surface of drilled gas wells. All water disposal is based on the 2004 CSG water management study commissioned by the federal and Queensland governments (and paid for by Arrow Energy, Origin and QGC). Rules are laid down in 2004 Gas and Energy Bill, December 2004 (with December 2008 amendments).
Based on the effects of intense irrigation on aquifers in NSW, Queensland producers will have to dispose of much more water than irrigation for agriculture has ever pumped. Some – if not most – will not be potable and that will cause further hazard. They are talking about 100 megalitres per day and this must eventually lead to empty aquifers and large quantities of salt. Will the cost to rural properties and towns in the Queensland basins be a disaster for water supply to towns, stock and irrigators? The biggest desalination program talks of 10 megalitres per day. In Wyoming's Powder River Basin, agricultural experiences do not appear to have been very good following gas production. The prospective gas producers have been given the green light to proceed in Queensland and now we can only wait to see the consequences.
Cheering Santos
Roy Davis
22 Sep 2008 10:22 AM
Thanks for your continued news on Santos.
Planting insight
Tony Bigum
18 Sep 2008 3:52 PM
There is an excellent paper, taken from the EWC annual report released on August 26 this year. Apart from explaining why the EWC model will work, it gives good insight into what lies ahead for those seeking to start up a traditional large scale LNG plant. Obviously some differences in conditions in Indonesia to East coast Oz.
I should disclose that EWC & AOE are two of my largest holdings.
Good things come in small packages
Tony Bigum
15 Sep 2008 12:53 PM
The major issue not getting much attention is the big difference between CSG and regular natural gas is that with the latter, once discovered and proved up, you just turn off the tap until you want to go into production. With CSG that's not possible. You can tweak a bit, but essentially the gas will continue to flow whether you can use it or not. All but one of the LNG/CSG plays have a looming issue with ALL the gas they're proving up for their large LNG trains will be next to useless to them until those trains come onstream. Arrow is best placed as it has under capacity in it's electricity plants, with more being added, so it can divert the gas that will eventually go to LNG to the electricity plants. They will probably be able to buy some of the useless gas off the others as well. This is why they went the smaller model route. They will be in production well before any of the bigger players and they don't have to prove up as much gas on the way.
Excellent timing
Lesley Cowie
12 Sep 2008 11:16 AM
Thank you, Stephen, for your timely and lucid analysis of the gas picture in Slow train-a-coming, September 11. Much appreciated.
Origin price no surprise
Richard Campbell
10 Sep 2008 3:26 PM
The market's surprise about the ConocoPhillips valuation of Origin's assets is itself surprising.
It should be widely known by now that ten of the world's super giant oil fields are either in sharp or slow decline. Apart from some large Iraq fields replacement reservoirs tend to be significantly smaller and/or exceptionally deep as in the Gulf of Mexico and off-shore Brazil. They will be many tomes more expensive to produce.
Gas resources are more complex, but are facing regional strain.
Russia is itself buying gas from Central Asia to supplement some of its south European deliveries. Europe will have little internal gas supply post 2020 as the UK Energy Minister has admitted openly and vigorously.
Meanwhile substitution of gas for oil will rise as autos and trucks switch to cheaper gas.
Conoco is well aware of these trends. Last year its CEO made it quite clear that he doubted that oil supply could rise about 100 mbpd and so his company is reacting entirely rationally: it is securing supply for Asian and international contracts at what will be seen to be very cheap prices. One asks what planet oil analysts are living on? In our own backyard Bass Strait has about 10 per cent of its oil remaining even allowing for better recoveries of the residual oil. Oil reservoirs always deplete. "Peak oil" is not a theory. It is an attempt to estimate plain geological realities. Queensland's gas extends world energy reserves and are for that reason very valuable.
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