By Peter Smith and Carola Hoyos
Published: March 7 2010 18:24 | Last updated: March 7 2010 18:24
The boom in the domestic US shale gas industry comes as Australia is about to secure its path to becoming the world’s biggest exporter of unconventional gas.
International oil companies are on the verge of sanctioning a handful of multi-billion dollar projects in the Australian state of Queensland. The projects involve extracting methane from coal beds and turning it into liquid natural gas so that it can be exported by tanker to hungry Asian markets, such as China.
The Australian coal bed methane industry has attracted a large group of companies, including BG Group, of the UK; a joint venture between ConocoPhillips of the US and Australia’s Origin Energy; a combination of Australia’s Santos with Petronas of Malaysia. Royal Dutch Shell has also teamed up with local player Arrow Energy.
Frank Harris, analyst at Wood Mackenzie, says that Australia is one of the few places that unconventional gas would be used for long-haul export, rather than domestically.
“The beauty of Queensland is that it has large reserves of coal bed methane and a domestic market that is too small to compete with export markets.”
Western Canada and Indonesia could also become exporters. In Indonesia coal bed methane represents a chance to make up the production shortfalls from ageing conventional gas fields. In fact, BP believes it could ship gas from its fields in the country as liquid natural gas before Australia. But local politics could complicate and delay that ambition, Mr Harris said.
Much of the rest of the world’s unconventional gas resources will supply domestic markets. But even the more captive production is having a deep international impact. In the US, domestic production of unconventional gas has removed the need for imports, leaving a glut of gas on the international market. Tony Regan, at Tri-Zen International, a consultancy focused on the oil and gas industry, says Australian producers are suffering. “It is becoming increasingly tough to line up customers because there is a surplus of LNG and customers of these projects will be able to drive hard bargains.”
In the longer term the market could get even more crowded if China, which at the moment is big gas importer, follows a similar path to the US. Analysts believe this is a possibility because the country has large coal bed methane and shale reserves and is keen to find a domestic alternative for dirty coal.
But a weak market is not Australia’s only challenge. Given the massive outlays, the competing projects need to consolidate and the first signs of that emerged last month when the Conoco/Origin team signed a sales deal with rival BG.
The companies must transport the gas hundreds of kilometres from Queensland’s interior overland to the port of Gladstone.
Building infrastructure, such as pipelines, to support the many natural resource projects in Australia will test the country’s capacity limits and could curtail some developments.
Copyright The Financial Times Limited 2010. You may share using our article tools. Please don't cut articles from FT.com and redistribute by email or post to the web.
Source: http://www.ft.com/cms/s/0/15f24e10-2a07-11df-b940-00144feabdc0.html?referrer_id=yahoofinance&ft_ref=yahoo1&segid=03058
Published: March 7 2010 18:24 | Last updated: March 7 2010 18:24
The boom in the domestic US shale gas industry comes as Australia is about to secure its path to becoming the world’s biggest exporter of unconventional gas.
International oil companies are on the verge of sanctioning a handful of multi-billion dollar projects in the Australian state of Queensland. The projects involve extracting methane from coal beds and turning it into liquid natural gas so that it can be exported by tanker to hungry Asian markets, such as China.
The Australian coal bed methane industry has attracted a large group of companies, including BG Group, of the UK; a joint venture between ConocoPhillips of the US and Australia’s Origin Energy; a combination of Australia’s Santos with Petronas of Malaysia. Royal Dutch Shell has also teamed up with local player Arrow Energy.
Frank Harris, analyst at Wood Mackenzie, says that Australia is one of the few places that unconventional gas would be used for long-haul export, rather than domestically.
“The beauty of Queensland is that it has large reserves of coal bed methane and a domestic market that is too small to compete with export markets.”
Western Canada and Indonesia could also become exporters. In Indonesia coal bed methane represents a chance to make up the production shortfalls from ageing conventional gas fields. In fact, BP believes it could ship gas from its fields in the country as liquid natural gas before Australia. But local politics could complicate and delay that ambition, Mr Harris said.
Much of the rest of the world’s unconventional gas resources will supply domestic markets. But even the more captive production is having a deep international impact. In the US, domestic production of unconventional gas has removed the need for imports, leaving a glut of gas on the international market. Tony Regan, at Tri-Zen International, a consultancy focused on the oil and gas industry, says Australian producers are suffering. “It is becoming increasingly tough to line up customers because there is a surplus of LNG and customers of these projects will be able to drive hard bargains.”
In the longer term the market could get even more crowded if China, which at the moment is big gas importer, follows a similar path to the US. Analysts believe this is a possibility because the country has large coal bed methane and shale reserves and is keen to find a domestic alternative for dirty coal.
But a weak market is not Australia’s only challenge. Given the massive outlays, the competing projects need to consolidate and the first signs of that emerged last month when the Conoco/Origin team signed a sales deal with rival BG.
The companies must transport the gas hundreds of kilometres from Queensland’s interior overland to the port of Gladstone.
Building infrastructure, such as pipelines, to support the many natural resource projects in Australia will test the country’s capacity limits and could curtail some developments.
Copyright The Financial Times Limited 2010. You may share using our article tools. Please don't cut articles from FT.com and redistribute by email or post to the web.
Source: http://www.ft.com/cms/s/0/15f24e10-2a07-11df-b940-00144feabdc0.html?referrer_id=yahoofinance&ft_ref=yahoo1&segid=03058
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