Are Santos and Origin running low on coal seam gas?

US drilling service company raises questions over coal seam gas supply for Queensland projects.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

US drilling service company Superior Energy Services (SES) has reportedly made claims that coal seam gas, which is destined to drive some of the country's largest LNG projects, is proving more elusive to obtain than initially expected.

The Australian has reported that SES is anticipating growth in its eastern Australian division because more wells need to be drilled to produce the expected volumes of gas. Currently drilled wells are "not meeting the production expectations", SES Asia Pacific head Ruud Boendermaker is quoted as saying.

And there are a lot of wells to be drilled. British natural gas company BG Group, which owns Queensland Curtis LNG (QCLNG), is drilling 70 new wells per month in order to achieve 2000 by the end of 2014.

The other big projects in the area include Gladstone LNG (GLNG) being undertaken by Santos (ASX: STO) and APLNG which is owned in part by Origin Energy (ASX: ORG). Both projects are targeting coal seams in the Surat and Bowen Basins.

While no specific project was mentioned by SES, it's worth noting that there are always uncertainties with drilling. They can't all be winners and targeting coal seam gas in particular is brand new to Australia so hiccups are to be expected.

Though unlikely, if there was a shortage of gas it could represent a huge opportunity for energy producers chasing natural gas in the Cooper Basin, the region that intersects Queensland and South Australia, as an additional source of supply.

Santos already has a gas production plant in Moomba, but several smaller operators including Drillsearch (ASX: DLS) and Senex Energy (ASX: SXY) own considerable prospective acreage, but currently lack the infrastructure to process gas discoveries.

These smaller operators could become prime targets for supply deals or potential targets if the big energy companies running the plants needed to tap into extra supply.

Foolish takeaway

It is extremely unlikely that the companies facilitating Queensland's giant LNG projects would push ahead with final investment decisions, risking billions of dollars, for less than certain results. Costs may rise if additional wells need to be drilled, but with two huge basins to cover won't hit success every time.

Motley Fool contributor Regan Pearson owns shares in Senex Energy.

More on ⏸️ Investing

A white and black robot in the form of a human being stands in front of a green graphic holding a laptop and discussing robotics and automation ASX shares
Technology Shares

Joining the revolution: How I'd invest in ASX AI shares right now

Advances in artificial intelligence (AI) could usher in a new industrial revolution. Here’s how you can invest in it.

Read more »

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »