BG won't deal until gas control settled

BRITISH Gas chief executive Frank Chapman is to meet Queensland Premier Anna Bligh today to tell her the company will not commit to the $8 billion liquid natural gas project in the state unless a dispute over ownership of its natural resources is resolved.

British Gas inherited the problem from Queensland Gas, which has been in a legal dispute with underground coal gasification company Linc Energy over land in southwest Queensland, over which both have claims. The problem is that under Queensland legislation, the same ground can be granted to coal seam gas companies under a petroleum licence, while UCG companies can peg it as a mining tenement. 

But Linc Energy also has a mining lease over the land and plans to use the coal in a process that involves setting fire to underground coal seams to produce fuel gas. Mr Chapman said that while he was aiming for a financial close for the entire project by the first quarter of 2010, it would not be possible unless his company had resource security over land near Chinchilla in western Queensland, which it is hoping to use as a source for coal seam methane. 

"We won't be sanctioning our project, a final investment decision will not occur, unless we can have certainly over the reserves," he said. 

Mr Chapman said the Government had to consider issues such as whether the technologies in each industry were proven, their economic scale, safety and environmental issues, and climate change. 

"Now in all of these areas, BG believes that there is a clear and compelling case for a proven technology, an industry built around LNG, as being a far superior investment for the Government to support, than something which is a nascent science on a tiny scale in comparison, which, if allowed to continue with a loss of resource, will essentially put off limits the production of a vast resource around which a vast industry can be built," he said. 

He said that one possible solution would be for the Government to allow one company to have an exclusive exploration right for five years and, if the lease had not been turned into a productive venture during that time, then exploration rights could then go to the other. 

But Mr Chapman could not give any guarantee about future gas prices in Queensland. 

He would only say that the three proposed LNG plants for central Queensland for an export gas industry could provide economies of scale that would actually bring the domestic price of gas down. 

"But it's only where you have to exercise a choice about whether you send gas to a domestic market or an international market because there isn't sufficient supply both that you get leakage between the prices," he said. 

Mr Chapman also said that while the global financial outlook was grim, it was impossible to say what the long-term effect on the viability of the LNG project would be. He said that while the relative price of oil was a factor in deciding the viability of an LNG project, the cost of production in both cases was relevant. "The real point is, can LNG be a viable global energy supplier competitive with crude oil? And the answer is absolutely, it can."

Andrew Fraser
Source: http://www.theaustralian.news.com.au/

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