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2015: the year of coalbed methane

World Coal,

2015 is set to be a big year for the coalbed methane (CBM) industry in Australia, as analysts predict a bumper year ahead.

New extraction techniques and the development of export capabilities are expected to drive rapid growth industry growth, according to IBISWorld.

The analysts said Australia’s CBM industry was undergoing significant transformation, with revenue tipped to rise 148% over the next year, to AUS$1.83 billion.

While the CBM industry will grow strongly, petroleum exploration looks to be a big loser, as oil prices continue to struggle.

Strong demand from China, Japan and South Korea will fuel a rapid expansion in earnings from CBM, according to the IBISWorld study.

"The opening of the domestic east coast gas market to the international market is expected to push gas prices higher – particularly as Australia is well-positioned to meet strong demand from Japan, China and South Korea, which are the world's three largest natural gas importers," IBISWorld senior industry analyst, David Whytcross, said.

New techniques that help CBM producers extract gas from coal seams are making CBM projects more viable, according to the study. But the rapid industry growth will really be down to the development of export capabilities – such as those seen at the Port of Gladstone where a number of CBM to LNG projects are coming online.

The three CBM to LNG plants on Curtis Island – BG Group’s Queensland Curtis LNG (QCLNG), Santos’ Gladstone LNG and Origin Energy’s Australia Pacific LNG – have been keenly anticipated by energy traders. The landmark first shipment of CBM sourced LNG from BG’s QCLNG project occurred last month and the other two projects are expected to come online shortly.

The CBM industry is coming off a low base and billions have been spent on tapping into the gas supply, building pipelines and transporting it. However, the industry will be buoyed thanks to supply chains coming online and an increased demand for gas.

"One feature from a technical point of view is that you can turn a gas plant on and off quite quickly," IBISWorld senior industry analyst, Caroline Finch, said.

"This ability to turn off and on gives you a lot of flexibility if you're going to mix it in with a grid that maybe in the future, like the Chinese are saying, will have more renewable energy on it. So imagine if you have a wind farm that's going, the breeze stops, you turn your gas on," Finch said.

CBM soars as petroleum exploration falls

While CBM flies high, petroleum exploration is set to come crashing back to earth. "High oil prices have acted as an incentive for global companies to invest in petroleum exploration over the past five years. However, the subsequent oversupply is going to hamper exploration in 2015, as Australian firms are unable to compete with the low production costs and high production volumes from the world's major oil producers," Whytcross said.

"The best-performing segment in the industry is expected to be natural gas exploration – but investment has already peaked for the segment, and additional gas extraction capacity will not be needed until export facilities become fully operational."

Edited from various sources by Sam Dodson

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