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New South Wales CBM may go to Queensland export terminals

World Coal,

Australian energy analysts have suggested gas from coal seams in New South Wales (NSW) may be transported to Queensland, where export terminals are short of gas.

The NSW Government has promoted coalbed methane (CBM) projects as a means of reducing domestic gas prices in the state of NSW itself. For example, the state government approved plans for Santos to drill for and extract CBM in various projects throughout the state, as part of a ‘Strategic Energy Project’. The project is geared at ensuring secure gas supplies for the state.

In a recent report, however, Tim Buckley, the director of energy finance studies at the Institute of Energy Economics, questioned whether NSW CBM would be piped to Queensland, where Santos has an interest in one of three major CBM-LNG export facilities due to start shipping gas next year.

"Let's not forget Santos's first obligation is to maximise profits for its shareholders," Buckley said.

Santos has previously argued in favour of further CBM projects in NSW, which imports 95% of its gas. The gas company said the state is likely to face much higher gas prices unless new domestic supplies are introduced and Narrabri could meet 25% to 50% of the state's needs.

Yet even the Narrabri project may not be enough to halt a rise in gas prices, it seems. In his report, Buckley said Narrabri gas might not halt a doubling or even greater rise in wholesale gas prices.

Using modelling, Buckley estimates gas from the Narrabri project would still arrive in Sydney at between AUS$7.34 and AUS$9.31 a gigajoule - well above the current AUS$3 – 4 average.

Buckley also noted there was no obligation for Santos to send gas to Sydney if better prices could be achieved exporting through Queensland.

A spokesman for NSW Resources and Energy Minister, Anthony Roberts, said Santos had committed to making gas available to the state market and the government's preference was for gas to stay in NSW.

However, there was no contractual obligation.

A Santos spokesman was asked if NSW gas could flow to Queensland but did not directly answer the question.

"We have repeatedly stated that the gas will be made available for the NSW market," he said.

A new pipeline would deliver gas from Narrabri to the NSW domestic market, the spokesman said.

Edited from various sources by Sam Dodson

Picture courtesy of BG Group.

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