PREVIEW-Australia to approve $30 bln coal seam gas projects

* What: Minister Burke to rule on coal seam gas projects

* When: Friday, Oct 22

* Santos, BG projects to add 15.7 mtpa to Australia LNG
output

By Rebekah Kebede

PERTH, Oct 20 (BestGrowthStock) – BG Group (BG.L: ) and Santos
(STO.AX: ) look set to win Australian environmental approval on
Friday for coal seam gas projects, clearing the way for final
decisions on the $30 billion investments.

Santos’ Gladstone LNG project in Queensland and BG’s
Queensland Curtis LNG are seen producing a combined 15.7
million tonnes per annum (mtpa) of liquefied natural gas, or
equivalent to nearly 90 percent of current Australian LNG
exports.

Analysts said Environment Minister Tony Burke is expected
to approve the projects, despite some speculation that his
decision could be delayed after traces of a carcinogenic toxin
were found in some exploratory wells at a rival coal seam gas
project operated by Origin Energy (ORG.AX: ).

“The fact that this stuff has been found gives ammunition
to the people who want to stop coal seam gas (but) it’s been
blown out of proportion,” said Adrian Wood, an analyst at
Macquarie.

“It shouldn’t be sending shock waves across the coal seam
gas industry.”

Analysts said the toxin, BTEX, which the Queensland
government has moved to ban in hydraulic fracturing operations
used to release gas from coal seams, likely came from
contaminated drilling equipment.

Minister Burke’s office said it could not immediately
comment on whether the timing of the decision would be
affected.
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List of the world’s LNG exporters: [ID:nSGE69H0EE]

List of Australian LNG export terminals: [ID:nSGE69H0EE]

Factbox on Queensland coal seam gas
projects:[ID:nSGE68Q005]

Graphic on LNG exports:
http://link.reuters.com/dab29p
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LANDMARK FOR GAS

As the first LNG projects fed by coal seam gas or coal bed
methane, final investment decisions from Santos and BG will
signal a landmark for the gas industry, where interest in
unconventional sources has ramped up in recent years.

“They are the first large scale coal bed methane to LNG
projects, so they put a stamp of approval on that,” said Tony
Regan, an LNG consultant with Tri-Zen International in
Singapore.

BG’s Queensland Curtis LNG project, its first in Asia, will
also be symbolic for the London-based company, signaling a move
into the Asian market, Regan said.

The Queensland coal seam gas projects are part of a larger
boom in the Australian LNG industry, which has A$200 billion
worth of projects that are expected to make Australia the
world’s second-largest LNG exporter by 2015.

In Queensland, two other coal seam gas projects, an Origin
Energy and ConocoPhillips (COP.N: ) joint-venture and a Shell
(RDSa.L: ) project, are expected to come online between 2014 and
2017.

Queensland coal seam gas to LNG projects and LNG projects
off the coast of Western Australia will nearly double
Australia’s LNG export revenue by 2014-2015, according to
Australian Bureau of Agricultural and Resource Economics
(ABARE) projections.

CONDITIONS LIKELY WITH APPROVAL

Although Burke is widely expected to give the go-ahead to
the projects on Friday, analysts say he is likely to attach
conditions that Santos and BG take steps to mitigate the
environmental impact of the projects.

Environmental and farming groups have opposed the projects,
saying they may adversely affect water supply from the Great
Artesian Basin.

Getting approval for projects under certain environmental
conditions is not unusual and none of the conditions is likely
to be a dealbreaker, said Graeme Bethune, chief executive of
Energy Quest, an Adelaide-based energy consultancy.

But any additional environmental conditions and heightened
competition for materials and skilled labour are likely to ramp
up the original cost estimates for both projects.

“The costs are likely to be quite a bit higher than those
announced a few years ago,” Bethune said.

Despite the likelihood of added costs, none of the
companies developing coal seam gas projects in Queensland has
signaled plans for consolidating projects or infrastructure so
far.

“Logic would suggest that they should be, but none of them
seem ready,” Regan said, pointing out that it would conserve
resources to avoid building separate berths and utilities.
($1=1.030 Australian Dollar)
(Editing by Ed Davies)

PREVIEW-Australia to approve $30 bln coal seam gas projects