PERTH (miningweekly.com) – Federal Resources and Energy Minister Gary Gray has slammed the Australian Greens’ announcement that the party would go to the September federal elections with a policy calling for a blanket ban on all new coal seam gas (CSG) exploration and production.

“It is an absurd proposition at a time when the global increase in demand for gas offers unparalleled opportunities for Australia,” Gray said.

Greens leader Christine Milne last week announced the party’s policy for no new CSG, saying mining companies were threatening water resources, farmland and the global climate.

"CSG is methane, which is a potent greenhouse gas, and is leaking from wells and pipes. Not only that, CSG threatens our land and groundwater, which underpins our regional communities and national food security," she said.

But Gray said that the government would ensure that the country was developing its “abundant” natural gas reserves in a careful and responsible way, with the aim of reducing energy costs.

“It would be silly and counter productive to price our clean gas out of the market by green tape, wrong priorities and absurd suggestions from the Greens for blanket bans on the CSG industry.”

The Minister pointed out that Australia had economically demonstrated CSG reserves of about 33-trillion cubic feet, adding that it would play an important role in providing domestic gas supplies. 

“The Greens ignore the key role of gas in the transition away from brown coal and they ignore the substantial commonwealth and state environmental regulations underpinning this industry.”

Gray noted that Australia's eastern states were expected to experience tight supply conditions in the coming years and added that policies should be targeted at increasing supply, not providing a blanket ban on development.

The eastern gas market was currently undergoing a transformation, with the development of new CSG resources and the creation of a liquefied natural gas (LNG) export industry in Queensland.

There were currently three projects under construction that would convert gas from coal seams into LNG for export, the first of which, QLD Curtis LNG, would go into production next year.

These three projects, combined, represent over A$60-billion in capital investment, and LNG production capacity from these projects would exceed 25-million tons a year, compared with Australia's total exports in 2011/12 of just under 20-million tons of LNG valued at around A$12-billion.

Meanwhile, Gray this week also announced that the federal government would be undertaking a study into the eastern Australian gas market.

“We know there is the gas in the ground, but the scale of change in the market is unprecedented – with an expected tripling of total natural gas demand in eastern Australia by 2020.”

The government has now provided additional funding for the Department of Resources, Energy and Tourism to do the study with the Bureau of Resources and Energy Economics.

Gray said that the study would provide a comprehensive analysis of the domestic gas market with the support of independent experts and stakeholders. It was expected to be completed by the end of 2013.

“As highlighted in our 2012 Energy White Paper, this change presents both opportunities and challenges for our nation. Without careful and independent analysis, there is a tendency to only see the challenges, uncertainty in the timing of production response, the implications of increasing exposure to international markets, and questions about the availability and cost of domestic gas.

“However, we need to also ensure we are well informed if we are to seize the opportunities available to us.”

The Minister said that the government was committed to addressing the risks of ill-informed interventions.

“These are complex issues, but the government has a responsibility to take policy decisions on the basis of a strong understanding of what is actually occurring, rather than running the risk of policy being driven by ill-informed populism.”

This study would inform the policy-makers of the gas demand-supply situation, and help identify potential supply constraints. It would also inform the gas market development work being undertaken with states and territories through the Council of Australian Government's Standing Council on Energy and Resources, he added.