Methane From Coal Seams  

Posted by Big Gav

Time for a roundup of local energy related news. Santos continues expanding their operations - this time buying into a coal seam methane operation in Queensland. The CSIRO's analysis of coal seam methane says that we have the world's fourth largest reserves and that potentially recoverable reserves are of similar order to natural gas reserves in the North-west (which is a lot). It appears that the industry is still in its infancy though, otherwise we wouldn't be talking about building pipelines to Papua New Guinea (more on that later).

On he subject of coal seams, one reasonably well known national park here is called "Burning Mountain" due to the burning coal seam there.

Early explorers assumed Burning Mountain's billowing smoke and peak of grey, smoldering ash was an active volcano. In fact, the mountain's naturally-burning coal seam, unique in Australia, is thought to have been smoking away for over 5500 years. After a short pleasant walk, you can look down from the viewing platform into the vents where the smoke emerges.

Woodside's CEO is off to East Timor to talk to their Prime Minister about the Sunrise project, while East Timorese President and long time resistance leader Xanana Gusmao is visiting a number of cities in Australia. There are also reports that the deal between Australia and East Timor over gas revenues and maritime boundaries may be settled within weeks (I've heard that story before though).
Voelte has visited Dili on several occasions to ensure the lines of communication between East Timor and Sunrise operator Woodside remain open. His latest meeting comes at a positive juncture, with Canberra and Dili now close to finalizing a revenue-sharing pact covering Sunrise, and East Timor abandoning its argument Woodside should build a gas processing facility on Timorese soil.

Sunrise contains up to US$40 billion of natural gas and concentrate, representing a significant windfall for East Timor, a poor nation of just 800,000 people which gained its independence in 2002 and still relies heavily on foreign aid. Still, several hurdles remain for the Sunrise partners, including parliamentary approval of the revenue-sharing pact. The agreement is expected to be inked this month but will take several months before it is ratified by lawmakers in East Timor and Australia.

A Goldman Sachs analyst is saying that BHP is undervalued when compared to other Australian energy companies like Woodisde and Santos. My view is this is because BHP is much more exposed to a downturn in the world economy than the pure oil and gas companies because of its large mineral operations - and doesn't have as much upside to steadily rising energy prices. When / if earnings from its energy divisions (oil and gas, coal, uranium) start to dominate those from metals, its share price will no doubt start to track movements in that of Woodside a lot more closely.

AGL signs up for PNG gas (following hot on the heels of Alcan's recent announcement).
For many years, the PNG pipeline had been the butt of jokes. One analyst famously claimed in 2002 that he would run around the dealing desk naked if it ever went ahead. The same year, Oil Company of Australia director John Piper said: "If PNG needs 175 petajoules [to be viable], they need all of the gas players in Queensland and NSW to fall over at the same time. That's impossible."

But Queensland's demand for natural gas has been steadily rising, with growth forecast of 5 per cent a year for the next 20 years. Wood Mackenzie analysis suggests that even with the PNG project, coal-seam methane and gas yet to be found, there is a clear need for new supply sources in eastern Australia from 2015.

Santos bought Queensland coal-seam methane assets for $612million last weekend to help maintain its natural gas market share. Oil Search's Mr Botten said Santos was also negotiating to take an equity stake in the PNG pipeline, which would reduce the holding of joint venture partner ExxonMobil.

Chevron is expanding further in Western Australia, with a successful bid for exploration rights to four blocks with natural gas potential offshore the Carnarvon Basin (I'm not sure how far these are from the Gorgon field but its in the same general area - though with WA "general area" can be quite large).

Back to the subject of BHP, Martin Hastings has an article up at Energy Bulletin that says that Woodside and BHP have little chance of building LNG terminals in California - but they (particularly BHP) are still rolling the dice and seeing what happens. I guess the question to consider is, how many LNG terminals will get built on the west coast over the next decade ?

Finally Rigzone notes that Hardman are continuing to search for oil (or at least maintain rights to do so) in the Falkland Islands.

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