Gas prices to double in 20 years as demand explodes, Santos predicts

Canberra Times
11 Jan 2011, Page: 13

The only way to meet a tripling in natural gas demand in eastern Australia is by allowing unconventional gas projects, such as coal seam gas, oil and gas producer Santos says. Santos's eastern Australia vice-president James Baulderstone told a conference that he expected gas prices to more than double within two decades, driven by demand and linking it to oil prices. Soaring global demand for liquefied natural gas is expected to contribute to Australia's wealth and make it one of the world's biggest exporters of the commodity.

However, the use of fracking to access coal seam gas or shale gas is strongly opposed by many Australians and Americans, including farmers, who say it contaminates prime agricultural land._ Santos insists that is false and gas is a safe, low-carbon alternative to coal for providing energy, with eastern Australia potentially having enough gas to supply it for a century.

"The five LNG trains already sanctioned, with more planned, represent a quantum change in eastern Australian natural gas demand", Mr Baulderstone told the Opportunities and Challenges for Australian Gas conference yesterday. "Provided natural gas development activity is allowed to proceed at the right pace, and the market is willing to pay the increased cost of extraction, there is sufficient gas in eastern Australia to meet this demand".

But he added that it was not viable to develop much of the gas reserves to meet the new demand at current Australian gas prices of about $4 a GJ. Australian gas prices were some of the cheapest in the developed world, Mr Baulderstone said. He predicted prices would move to $6 to $9 a GJ. Santos is heavily invested in coal seam gas through the $US16 billion ($A15 billion) Gladstone Liquefied Natural Gas project it is leading and is also developing shale gas projects in the Cooper Basin in central Australia. It is also close to finalising a $924 million bid for NSW-based Eastern Star Gas, which controls NSW's largest coal seam gas resource. Santos shares were down 24¢ at $12.96 yesterday.