CSG, Markets, Technology

CSG may give new wings to the Australian economy

In December 1986 canaries were finally made redundant in British coal mines. Twenty-two years later the gases the canaries were used to detect offer Australia’s economy new wings.

The canary was used from the early 1900s to detect CSG that created a safety risk in underground pits. However today, in the vast coal beds of Queensland and northern New South Wales in particular, our yellow avian friend has been replaced by high-tech seismic imaging and drill rigs.

The search for yet more CSG to provide a relatively low cost, low greenhouse emissions fuel for Australia and the neighbouring Asia-Pacific region is a vigorous one. The world’s demand for energy is projected to grow by 40 per cent to 2030 according to ExxonMobil’s most recent global outlook. And Queensland’s energy demand is projected to grow by more than three per cent per year.

Queensland’s petroleum riches and the companies exploring for them are well placed to help feed this demand thanks to government policies that have encouraged the CSG industry, with four CSG-based liquefied natural gas (LNG) projects proposed for the state.

In the Asia-Pacific alone, LNG demand is expected to grow from its current level of about 100 million tonnes (MMt) to a figure approaching 200 MMt/a by 2015, compared to Australia’s total production last year of 15.1 MMt.

Where once canaries feared to tread, today Australian innovation in tapping CSG is leading an energy revolution that will power our region on the path to a carbon-constrained future.

The recent APPEA 2008 conference in Perth heard that CSG production increased by 44 per cent in 2007 to 112 billion cubic feet (equal to about 20 million barrels of oil).

There is rapidly growing production from the Surat and Bowen basins and in particular west of Taroom at Santos’ Fairview and Origin Energy’s Spring Gully fields, south of Miles at QGC’s Berwyndale South and at Arrow Energy’s Moranbah.

CSG reserves have now reached over 7.3 trillion cubic feet (Tcf) (equivalent to about 140 MMt of LNG), an increase of 2.3 Tcf in two years.

Commentators are speculating that up to two to four times more reserves will be booked as a result of increased exploration. And the potential resource is estimated to be as high as 250 Tcf by the CSIRO. To put that in perspective, 3Tcf of gas has the same energy content as Australia’s total annual thermal coal exports.

CSG has come of age to the extent that it now supplies about 18 per cent of the eastern Australian gas market and is eyeing off the higher value export markets.

There are now four east coast LNG plants proposed to come on-stream in the period 2011 – 13. This exciting development is as much a testament to the industry’s confidence in the Queensland Government as it is to the magnitude of the resource base.

The potential of CSG to serve Australia’s domestic gas needs and a seemingly insatiable export market is apparent, but there are many hurdles to this important resource being extracted and used for the benefit of all Australians.

One issue the industry continues to grapple with is how to cost-effectively and responsibly deal with the huge amounts of water generated by the process of extracting gas from around coal beds.

Unlike conventional oil or gas wells, in the case of CSG, the water comes out before the gas does and APPEA believes there is still some work to do to ensure we have the policy measures right in this area.

The rates of water production are certainly larger than needed to fill a canary’s birdbath but they vary from site to site. This provides an opportunity for governments to create appropriate policies to aggregate this water for treatment and supply to local, predominantly drought-ridden, communities.

Origin Energy recently won the APPEA Environment award for its commissioning of Australia’s first fully integrated CSG water treatment facility in Central Queensland.

Instead of constructing hectares of evaporation ponds, Origin has commissioned the largest CSG water treatment facility in the world, producing 9 million litres per day – 10 per cent of the capacity of the proposed $1.3 billion Sydney desalination plant project. Trials on cropping land are under way.

The oil and gas industry recognises that water is a community resource and that governments have an important role to play in its sustainable usage.

Presently, as soon as a reuse resource is released to water bodies, the water immediately reverts to being the property of the Crown, and so to realise an economic return the industry must construct a separate pipeline network to potential customers.

Clearly in many circumstances this makes reuse cost prohibitive and in future could be a factor in project economics that may interfere with the potential of CSG to give new wings to the Australian economy.

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