5 minutes with Reg Nelson

Mr Nelson started his career as a member of seismic crews operating in far northern South Australia and the Northern Territory. He was friends with Beach Energy founder Reg Sprigg for many years before he joined the company in 1992. Appointed Chief Executive Officer in October 1995, Mr Nelson became the company’s Managing Director in May 2002.

Your thoughts on a carbon constrained economy…

If common sense prevails, the Carbon Pollution Reduction Scheme could well work to make gas an even more desirable commodity. Gas is a high hydrogen fuel, because for every atom of carbon in a methane molecule there are four atoms of hydrogen. This is a simplistic view, but it goes right to the heart of why gas is a clean-burning fuel.

Any introduction of a carbon tax will drive things like power generation more in the direction of burning gas other than coal. That represents a lot of opportunities for gas on the domestic scene.

The greatest achievement of the gas industry in the past ten years…

LNG developments have positioned Australia to have a really strong export opportunity to Asia in particular. Australia is certainly poised to take advantage of the market penetration if it’s able to do so quickly

In the last few years, the emergence of coal seam gas (CSG) for LNG export has been very innovative, and a new proposition worldwide.

The top two government incentives/policy measures you would like to see implemented today…

First of all, the burden of taxation must not become excessive. The Government must make sure the details of any scheme do not disadvantage Australia globally in attracting investment capital and its ability to export these commodities. Keeping the skills base in Australia is another thing that should flow from this. If we have a strong, well-resourced industry that isn’t over taxed, we will attract good people here.

Secondly, Government assistance in development of the infrastructure required to be able to export Australia’s gas resources is also integral.

Where is Beach Energy investing in Australia…

One of the most important emerging areas in Australia is shale gas. If you look at the United States, shale gas is probably the fastest growing potential area for gas production.

This is something Beach Energy identified a few years ago and we set out to identify the best areas in Australia, particularly eastern Australia, and we believe we’ve got those particularly with our interests in the Cooper Basin. The gas-in-place potential there is equivalent to, or even greater than, the combined CSG resources of New South Wales and Queensland combined, with estimates at 200-300 Tcf of gas.

If the economic conditions provide incentives rather than disincentives, it is a very strong emerging industry. The cost reductions that we’ve seen in the US with the development of new technologies, will see shale become a very important source of gas that will be important for domestic power generation, export, fertilisers, explosives, and even specialty liquid fuels like jet fuel and diesel.

Finally, advice for new entrants to gas industry…

Try to spread the risk. There is a good argument for retaining a balanced portfolio. Get projects that will deliver revenue, even if it’s short term revenue, to keep you alive when risk capital dries up as it does from time-to-time in the commodities cycle.

If you keep enough cash coming in to stay alive, you will be well poised to take advantage of any opportunities that arise in any downturn.

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