The Future Is Coal ?  

The Herald has an article on the move towards getting more of our natural gas supply from coal seam methane, driven by declining production from the Cooper Basin - the major source of gas for the east coast - and the slow progress on the gas pipeline from Papua New Guinea. The article seems rather optimistic about the supply of natural gas from coal seams in the US, claiming that 8% of US electricity generation is derived from it (no source is quoted, unfortunately).

Natural gas reserves in the mature Cooper Basin fields have been declining faster than expected, causing headaches for Australian natural gas producers and customers. But rather than let profits and supply falter, energy companies are planning to meet future demand in part through an increased use of coal-seam gas.

Origin Energy noted as much in its June quarter production release on Friday, which came a month after Santos surprised the market by paying $612 million for Tipperary, the US owner of a Queensland coal-seam gas producer. Most analysts thought Santos overpaid but, regardless of price, the acquisition focused market attention on the fact that as Cooper Basin reserves decline, coal-seam gas is an increasingly viable option to service NSW and Queensland more cheaply than the proposed Papua New Guinea pipeline.

Australia's industry is at least a decade behind the US, which has a well-developed national gas pipeline system and uses the natural gas sourced from coal seams to generate about 8 per cent of the country's electricity. But the coal-seam gas industry has made strong inroads in Queensland, where, due to state mandate, 13 per cent of power generation has been sourced from gas rather than coal since January.

Unlike Queensland, NSW has not set a specific target for natural gas use. But a greenhouse gas abatement scheme penalises energy companies for over-reliance on coal, providing an incentive to switch some operations to natural gas. "We'll never do away with coal. It's the cheapest form of electricity around," Eastern Star Gas managing director Dennis Morton said. "The feeling I got is [the NSW Government] is moving toward natural gas-fired power generation."