The Future of Coal Seam Gas

1
The Future of Coal Seam Gas

• Future growth is potentially rapid (domestic use
  and LNG exports)
• Proposals for an LNG export industry on the east
  coast of Australia, exporting from Gladstone
• Gladstone LNG projects are unique in using gas
  sourced from extensive coal deposits

2
Capturing the LNG Market Opportunity

• Asia Pacific LNG demand to increase by at least
  40-60 mtpa by 2017
• At least 6 new Australian LNG projects, 5 in
  Queensland, are under consideration so a 60 mtpa
  target is achievable (from 20 mtpa in 2008)
• This would make Australia the worlds third
  largest LNG producer (after Qatar and Nigeria)
• Will require at least A40 billion or 5 times the
  capital invested in new LNG capacity over the
  past decade

3
Priorities and Issues
Upstream Industry Strategy

• A government/industry partnership to ensure the
  value of Australias oil and gas resources to the
  Australian people is maximised, petroleum energy
  security delivered and the long-term
  sustainability of an Australian oil and gas
  industry assured.

4
Our vision and targets

• In the decade to 2017
• LNG production capacity increases from 20 Mt a
  year (in 2008) to at least 50-60 Mt a year
• natural gas use for industrial purposes and as a
  competitive feedstock for resources processing
  doubles
• in a competitive electricity market, 70 of all
  new electricity generation capacity installed in
  Australia is gas-fired.

5
What we could achieve

• This could deliver enormous benefits
• a potential quantum improvement in the balance of
  trade an extra 20b a year by 2017
• lower greenhouse gas emissions 180 Mt CO2-e a
  year
• greater energy supply security
• increased revenue to governments billions of
  dollars a year
• increased employment
• increased regional development
• reduced water usage in electricity generation.

6
Existing LNG Plants
Darwin LNG
NWSDP
Total Existing LNG Capacity 16.3 mtpa (0.9 Tcf)
Source ABARE
7
Existing Committed LNG Plants
Darwin LNG
NWSDP
Pluto
Total Existing Committed LNG Capacity 23.6
mtpa (1.1 Tcf)
Source ABARE
8
Existing, Committed Proposed LNG Plants
Darwin LNG
Sunrise
Timor Sea LNG
Prelude
Ichthys
Browse LNG
Curtis LNG
NWSDP
Wheatstone
Fishermans Landing LNG
Pluto
Gorgon
Gladstone LNG
Scarborough
Pluto II
Sun LNG
Total Existing, Committed Proposed LNG
Capacity 97.8 mtpa (4.5 Tcf) Estimated Capital
Investment 197 billion (NPV)
Source ABARE
9
Challenges for Realising Australias Growth
Potential

• The future contribution of the industry will
  largely be determined through a combination of
  factors, including how it addresses its
  challenges
• rapidly declining domestic oil production
• growth in export opportunities for gas in an
  increasingly competitive and dynamic global
  supply market
• the competitiveness of gas with other fuels and
  its ability to increase its penetration in
  domestic markets

10
Challenges for Realising Australias Growth
Potential (cont.)

• the increased national and global focus on
  climate change policy
• more rigorous community expectations in relation
  to safety and environmental performance
• the availability of skilled labour
• the need for, and funding of, a coordinated
  program of research and technology development.

11
Operational Challenges

• Coal seam gas water
• Coal seam must be dehydrated to mobilise the gas
• Industry has lead the way in CSG water treatment
• Government policy does not reflect the
  aspirations of industry and the community
• Potential for more than 25 GL per year to be
  produced
• Significant benefit can be delivered to urban,
  agriculture, industry and environmental use
• Partnership with government to achieve a regional
  solution

12
Operational Challenges (cont)

• Tenure security
• Qld government legislative framework allows grant
  of overlapping tenure
• Overlapping exploration tenure for CSG earmarked
  for proposed LNG plants
• Land access
• CSG operations are new and growing rapidly
• Increased concern from landowners/occupiers about
  CSG operations
• First LNG facility to be constructed in a
  populated area

13
Operational Challenges (cont)

• Access to acreage
• Acreage release process
• Significant lag between exploration and
  subsequent development decisions
• Obtaining timely approvals (environmental, native
  title and landowner)
• Fiscal regime that
• Balances reward with risk
• Recognises the unique circumstances of the
  Queensland industry

14
Operational Challenges (cont)

• Enormous up front capital costs
• Increased by 40-60 per cent over the past two
  years)
• Infrastructure needs for gas transport and
  processing, Curtis Island, shipping channel,
  port, and CSG water aggregation, treatment and
  distribution
• Long project construction periods (up to five
  years for LNG projects)
• Generally low project returns

15
Regulation reform

• The perception of Queensland as an investment
  destination with a low level of sovereign risk
  must be made a reality.
• The increasing complexity of Queenslands
  regulatory regime is increasing investor
  uncertainty and weakening one of Australias main
  competitive advantages.

16
Conclusions

• Future for the industry can and should be very
  positive.
• A range of policy impediments must be addressed
  if the industrys promise is to be realised.