CSG in Australia

In the last four years CSG has become a key component of Eastern Australia’s energy supply, growing steadily at around 3.8% p.a., and at 5.3% p.a. in Queensland. Increasing demand for power generation from gas in NSW & Queensland, as well as a potential gas supply shortfall from 2010-12 as Cooper Basin production declines, will support further growth in CSG.

This growth will increase dramatically as a number of major industry participants develop new gas fields. 

Coal seam gas, like conventional natural gas, is mostly methane. It is attached to the surface of coal particles by adsorption and held there by the pressure of water that permeates the cleats of the coal seams.

The gas is extracted by drilling into coal seams and pumping out the water, reducing the pressure and releasing the gas. It is then gathered for piping to gas markets.

An environmental fuel

While long-term we need to move to renewable energy resources, coal seam gas is among the best immediate options environmentally. Gas is less polluting, more responsive, more efficient and has a lower greenhouse gas impact than coal for power generation.
The water that’s pumped out to release the gas is also valuable. In some areas it can be used without treatment for stock or agricultural use. In other areas it’s usable with suitable treatment.

Technical developments

The continuing development of new drilling and completion techniques is having a profound impact on the ability to commercially extract CSG from different coals. Every coal is different and requires a matching technique.

Close to major markets

Most of Australia’s coal seam gas is in New South Wales and Queensland; much of it fairly close to existing major gas pipelines. This helps make coal seam gas attractive to power station operators, large industrial users and gas retailers. As for timing, with the gas reservoirs of the Cooper Basin in South Australia now declining, the east coast of the country has been looking for new sources, and CSG is meeting that demand with a significant portion of Queensland's gas supply being supplied by CSG.

What’s underway?

There are currently 17 listed companies operating in coal seam gas in Australia with more than 5,000 PJ of 2P (proved and probable) reserves.

Five are delivering gas, another seven have 2P reserves and five are exploring or assessing the value of gas reserves.

There is currently an estimated $2 billion of capital expenditure, including approximately 3,000 wells planned for NSW and Queensland. Apart from the initial drilling, each producing well needs completion, connection to the processing facility and often an annual workover.

Liquified natural gas (LNG) is another potential use for CSG. Higher international prices for LNG are driving a number of companies to consider major production increases. Companies currently actively pursuing LNG include Arrow Energy, Santos and Sunshine Gas. Queensland Gas Company, in partnership with British Gas, is planning an $8 billion gas processing plant in Gladstone, Queensland to service the export market.

Successful development of low cost production methods has established a large resource base. Rather than seeing strong CSG production contributing to weaker onshore prices, it may well be the catalyst for new demand, such as base load power generation, small scale domestic LNG for transport fuels and large scale export LNG production with further potential for other value-added commodities such as gas to liquids. Australian East coast prices are expected to increase with growing domestic demand, gas pipeline interconnection promoting gas use and enabling new demand, impending carbon pricing, water limitations restricting new coal-fired power generation and development of gas projects linked to global energy prices.