Coal seam gas must prove its real worth  

The SMH has an article on the Australian coal seam gas industry, saying that it is time it lived up to the hype regarding LNG exports - Coal seam gas must prove its real worth.

FOR the past three years the coal seam gas industry has been the new god of energy, promising big profits, green energy solutions and providing the gateway to align Australia's gas prices to the more lucrative global prices.

Investors have crammed into the stocks, lifting the value of the listed Coal seam gas (CSG) sector from $100 million in 2002 to $1 billion in 2006, and $5.8 billion at the close of business on Friday.

What makes this valuation explosion even more impressive is that the figures exclude the larger, vertically integrated companies Santos and Origin Energy, which have big exposures to CSG.

But the clock is now ticking for the industry to turn rhetoric into reality and start making some financial investment decisions (FID).

The brutal reality is that no CSG to LNG venture has reached a financial investment decision on the many projects that have been talked about in Queensland's Gladstone region.

There are five FIDs, worth more than $60 billion, that need to be made in the next 12 months, at a time when concerns are growing that there will be too much capacity fighting for a market.

And now there is a new complication: regulatory costs related to environmental issues. Until recently, the CSG industry was seen as an environmentally friendly energy, but farmers and environmental campaigners are concerned about the potential damage to waterways and crop land and the impact of the disposal of salt produced during the CSG extraction process.

Until recently, the water extracted during the coal seam gas process was pumped into ponds, where it would evaporate. But this technique was recently frowned on by the Queensland Government because it was creating ponds of salt.

This has forced companies including Santos to search for alternative solutions.

A report released on Friday following a Senate inquiry into the impact of CSG in the country's most important agricultural area, the Murray-Darling Basin, links CSG with Australia's most sensitive environmental subject, water.

After receiving numerous submissions from environmental groups highlighting concerns, the report recommends as a matter of priority, and preferably before the release of future mineral exploration licences, that state governments establish regional water plans in areas potentially subject to mining or extractive industry operations.