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Massive revenue growth forecast for Australian CSG industry

Massive revenue growth forecast for Australian CSG industry

Photo by Bloomberg

13th January 2015

By: Esmarie Iannucci

Creamer Media Senior Deputy Editor: Australasia

  

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PERTH (miningweekly.com) – Revenue from the coal seam gas (CSG) industry in Australia has been flagged to grow about 148% during 2015, industry researcher IBISWorld reported this week.

In 2014, the CSG industry accounted for revenues of A$737.9-million; however, IBISWorld predicted that this would grow to some A$1.83-billion in 2015.

IBIS noted that while CSG projects have become more viable owing to new and improving extraction techniques, it was the development of export capabilities that was expected to drive rapid industry growth.

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

Supply to these markets from considerable CSG reserves in Queensland would be boosted in 2015 as the Curtis Island liquefied natural gas (LNG) plants became operational.

“Once operational, the Curtis Island LNG plants will be the world’s first projects to turn coal seam gas into liquefied natural gas, which will be a boon to operators of newly developed coal seam gas fields in the Cooper basin,” said Whytcross.

Meanwhile, the world price of crude oil was plummeting due to a supply glut spurred by overproduction from members of the Organisation of Petroleum Exporting Countries, the US and Russia.

Whytcross said that the severe crash in oil prices meant that the investment returns available from petroleum exploration activities were drastically reduced.

Exploration projects, therefore, have been less viable for Australian firms, particularly as the stock prices of such firms have begun to dive. These conditions were projected to result in an 18.9% decline in industry revenue in 2015.

“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,” said Whytcross.

Revenues from petroleum exploration were expected to drop by nearly 19% in 2015, from the A$4.63-billion reported in 2014 to A$3.75-billion in 2015.

“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,” added Whytcross.

Edited by Mariaan Webb
Creamer Media Senior Deputy Editor Online

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