Credit ratings agency Fitch casts doubt on some Australian LNG projects  

Posted by Big Gav in , , ,

The Australian has a report on concerns that the Australian coal seam gas boom may not be as large as hoped due to China finding alternate gas sources (both local unconventional gas and gas piped in from Russia. Local natural gas projects seem to be on firmer ground (even if they are offshore) - Credit ratings agency Fitch casts doubt on some LNG projects .

Following recent reports from Macquarie and Deutsche warning of lower than expected Chinese demand, Fitch, an international ratings agency, today said the significant competition between projects would see some deferred or cancelled.

Along with the massive Gorgon and Pluto LNG projects under construction in Western Australia, a swag of majors including Santos, BG Group, Shell and Origin Energy have massive multi billion dollar projects planned, leading to increased market talk consolidation is needed.

While Fitch said there would be strong growth in demand for Australian LNG exports in the medium-term, upward cost pressures for materials, equipment and skilled labour would see some projects fall over.

"Fitch does not believe that buyers' appetites will be deep enough to commit to contracts to underpin all of the proposed projects," said Sajal Kishore, a director in Fitch's energy & utilities team.

"Long-term sales contracts are key to funding and first-mover projects are far more likely to proceed in a timely fashion."

Santos last month became the latest to secure such a deal, selling a 15 per cent stake in its Gladstone LNG project to French major Total, which also agreed to buy 1.5 million tonnes of LNG a year for 20 years. ...

In an analysis last month, Macquarie suggested energy majors are too optimistic about China's long-term LNG demand, predicting only one-sixth of the 140 million tonnes a year of yet-to-be-approved LNG capacity planned in Australia to come on line in the next decade.

Key is an expected increase in Chinese domestic coal-seam and shale-gas production, combined with a proposed pipeline from Russia.

Deutsche released a similar report with regards to Chinese production, which is expected to hit Queensland's burgeoning coal-seam gas export industry more than the conventional LNG projects planned off the nation's northwest.

The SMH reports on environmental concerns surrounding coal seam gas extraction - Birds, trees - and drillers: Miners shatter the 'tree change' tranquility.
Michael Bretherick and his family moved to Tara, about 400 kilometres west of Brisbane,four years ago for a tree change.

He said the mining company, BG Group – owners of QGC – moved into the area about 18 months ago and has been drilling night and day for coal-seam gas.

Coal-seam gas extraction requires the removal of large volumes of water from coal seams to release trapped gases.

He cited a litany of grievances against the company, including allegations of constant noise, adverse health impacts for humans and farm stock, potential damage and contamination of aquifers, polluted dams, and contaminated water in tanks.

“Our dreams have been turned into nightmares. I’m 64 and I came here to retire but because of the mining we want to leave but there’s no way anyone would want to buy here so we can’t sell,’’ he said.

Mr Bretherick said his youngest children, aged 7 and 9, had rashes and nosebleeds after playing near a dam. ‘‘A calf fell into the dam and only lived a couple of minutes; its skin peeled off,’’ he said.

Once the mining started, neighbour was pitted against neighbour, marriages have split, businesses have closed and many locals are suffering health problems including depression, he said.

The Australian also has an article about environmental concerns and rural opposition to CSG extraction - Burke warned over coal-seam gas projects.
TONY Burke is considering a report that warns the coal-seam gas industry could deplete groundwater in the Great Artesian Basin.

The federal Environment Minister is preparing to rule on several multi-billion-dollar projects and remains committed to a deadline of October 22, when he is expected to advise international energy giants Santos and BG Group whether he will grant environmental approvals for their projects converting coal-seam gas to liquefied natural gas, worth an estimated $22bn to the Queensland economy.

While the projects have been supported by the Queensland government, farmers and green groups have formed an alliance to call for a moratorium on the projects.

Their main concern is a potential depletion of the groundwater, something acknowledged by CSG companies in specific areas. ...

Santos and BG Group have acknowledged their projects -- which will extract 270 megalitres a day from the coal seam at their peak in 2014 -- will have an impact on groundwater levels.

The Precipice Sandstone aquifer could drop as much as 15m, the Hutton Sandstone water table 3m and the Springbok Sands up to 5m, environmental impact statements acknowledge.

During the gas-extraction process, wells are drilled 300m to 600m below ground, pushing briny water and gas to the surface because of the pressure gradient.

The companies will offer "make-good measures" to farmers when the water table drops, including lowering water pumps, compensation and providing bulk water. But landholders have warned that Mr Burke faces a "permanent state of unrest in rural Queensland" if he approves the projects. "If this is approved, there is going to be civil disobedience and non-violent protest," said Michael Bretherick, spokesman for the Western Downs Alliance.

2 comments

The only way "coal seam gas" can pay off is with government tax credits.

There is plenty of CSG being produced in Australia right now and it is being consumed by power stations.

It doesn't have any notable government subsidies.

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