The Rising Influence of Rising Affluence

[DewDiligence]

Re: LNG/CSG projects

Hi, zebra, welcome to the board, and thanks for your list of off-the-beaten-track LNG investment ideas.

The main thing that worries my on the Australian LNG boom now is that at some point there could be big disappointment with the projects based on coal seam gas (CSG)… must be 5 or 6+ LNG projects in the works now in Queensland Australia based on CSG. Will take about 4000 to 5000 wells to feed each LNG plant. And the wells need to be dewatered to produce gas. So tons of water treatment and disposal issues. Plus huge gathering systems to build and maintain. And CSG is lean, dry gas. No nice gas liquids to help the economics.

Despite these drawbacks, COP (one of the energy holdings in the institutional portfolio I advise) is into CSG in a big way via a JV with Australia’s Origen Energy:

http://www.originenergy.com.au/news/article/asxmedia-releases/970

According to a recent webcast, COP considers this JV one of its 4 or 5 most promising global projects of any kind, with initial LNG sales expected in 2014.

My favorite LNG company is IOC. They have an on-land project in Papua New Guinea with probably a 10 TCf resource. Much cheaper to develop than these offshore projects. Did a bit of consulting work on one of the Australian offshore projects two years ago, and was appalled at the costs involved.

On the other hand, offshore projects such as Gorgon typically have lower environmental risks insofar as there is no one living next door to spearhead a political backlash. The on-shore experience in Nigeria has made this a non-trivial concern, IMO, even in “First World” countries such as Australia. Regards, Dew