The four major energy companies powering Queensland’s booming $70 billion coal seam gas developments have spent the past few days down-playing the impact of the Liberal National Party’s landslide election win on the industry.
But scratch a little beneath the surface and there are signs that the warm embrace that had been offered by the Labor Party to project promoters
The CSG industry has attracted controversy due to an extraction process known as fracking. This involves injecting a solution of water, sand and chemicals into a well to force cracks in the underground coal seam to allow the gas to flow.
The massive ramp-up in drilling activity has raised questions over the potential contamination of water supplies and the surrounding environment. The LNP has proposed several changes to regulations, including the requirement for “full and fair" compensation payments to landowners for actions including “any loss of production at any time".
Deutsche Bank told this columnist it expects the cost of new CSG wells in Queensland could rise under the LNP with further limits to be placed on drilling in areas with high-value agricultural land.
When you consider tens of thousands of CSG wells are still to be drilled across the central Queensland coalfields, executives like Origin Energy’s
While the LNP certainly supports CSG development, it will have a keen sense of just how much community opposition exists to issues ranging from environmental approvals through to compliance standards and water management.
Recent opinion polls found up to a quarter of Queenslanders are strongly opposed to CSG extraction. More than three-quarters of voters support giving farmers a veto right if exploration or mining activity is proposed on a landholder’s property.
Ironically, the Australian Party’s
Despite his political U-turn on the wider resources industry, Katter is another wild card whom CSG promoters need to be prepared for.
Among his most drastic proposals: a 12-month moratorium on all new CSG projects which could include the mooted expansion of liquefied natural gas trains along with additional safeguards for strategic land where CSG projects would be prohibited.
Projects under construction in the Queensland port town of Gladstone include the QGC project, owned by the UK’s BG Group, worth $20 billion; Santos’s $16 billion Gladstone LNG development and Origin Energy’s $14 billion Australia Pacific LNG facility.
But perhaps the project most at risk is the Royal Dutch Shell and PetroChina-led Arrow Energy venture. Securing environmental approval against the backdrop of a new government already bulging at the seams with competing gas projects – not to mention the heated construction market – would appear increasingly difficult.
In one sense, the LNP is unlikely to propose drastic changes to the industry given the dollars at stake. It forecasts royalty receipts from the state’s mining boom will surge to $6.1 billion in the next decade from $2.6 billion now.
But Arrow and its rivals will be urgently seeking assurances about exactly how the LNP proposes to balance the need for its investment dollars with rising community hostility over the CSG industry’s footprint.
The Australian Financial Review