The Business Spectator reports that Santos are getting some positive market feedback after expanding into shale gas in inland Australia (supplementing their natural gas and coal seam gas production) - Santos pins hopes on first shale gas.

Oil and gas producer Santos says Australia's first commercial shale gas well is ready to go into production, helping to boost supply and keep prices stable in eastern Australia.

Santos said its Moomba-191 well in the Cooper Basin was now producing dry gas after the company reported an increase in underlying first half profit and maintained its full-year production guidance on Friday. ...

Chief executive David Knox said shale gas flows from the Moomba well were a significant milestone in the company's program to unlock the vast unconventional gas potential of the Cooper Basin that straddles the South Australian and Queensland border.

"The shale well result has been an outstanding result for us and potentially for eastern Australia for the very long-term future," Mr Knox told analysts on Friday. ...

"The share price is up because of the surprisingly good flow rate that they're getting at their Moomba 191 shale gas well," Mr Wood said. "You can start to talk about some very large numbers on the back of that, but it's very early days. Certainly this flow rate was better than we were expecting."

Santos is tipping much higher natural gas prices for Australian consumers and a boom in unconventional gas - Gas prices to double in 20 years as demand explodes, Santos predicts.

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. ...

''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 gigajoule.

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 gigajoule.

The Australian (now beginning to paywall itself into oblivion) reports that AGL are already seeing much higher prices - AGL secures east coast's most expensive gas deal.

AGL Energy has snared the east coast's most expensive domestic gas sales contract in what is thought to be a 50 per cent price jump forced by the expected demand from Queensland's coal-seam gas export plants. AGL is believed to have secured a price of about $6 a gigajoule for gas that will be used to supply miner Xstrata's Mount Isa operations for 10 years from 2013.

The SMh reports that fracking for coal seam gas now has a new cause for concern - earthquakes - Fracking shock reignites concern.

DEBATE over the safety of ''fracking'' in Australia has reignited after a gas project in Britain was named as the likely cause of 50 tremors this year.

A panel of seismic experts has found it ''highly probable'' that fracking conducted by Cuadrilla Resources - 41 per cent-owned by Australian drilling company AJ Lucas - was the cause of two significant tremors and 48 aftershocks near the British town of Blackpool in April and May. The findings come after the independent MP Tony Windsor told the federal government this week he would not support its mining tax unless more was done to investigate the safety of fracking in Australia.

Fracking, or hydraulic fracturing, is a controversial gas extraction technique that uses high pressure solutions to fracture rocks deep underground. The process is used in both coal seam gas and shale gas extraction and, if poorly executed, can contaminate groundwater and trigger seismic activity.

Fracking is most common in the United States but is fast spreading to other nations like Australia and Britain, where Cuadrilla hoped to develop a gas source near Blackpool. The company was forced to launch an investigation after tremors of magnitude 2.3 and 1.5 appeared to follow a series of fracks.

The report - commissioned by Cuadrilla - confirmed the fracking was ''most likely'' to have caused the tremors but said the region had ''rare'' geological factors that were one of ''many factors'' which ''coincided to induce these seismic events''.

AJ Lucas services the main coal and coal seam gas basins in Queensland and NSW, including in the Hunter Valley, Bowen Basin and Surat Basin.

The Cuadrilla revelations are not the first time fracking has been linked to tremors, with regulators in the US state of Arkansas expressing concern that two shale wells - now owned by BHP Billiton - were responsible for causing earthquakes.

The ABC reports on some more consolidation of he Australian coal seam gas industry - Santos expands by buying another CSG company.

Coal seam gas company Eastern Star Gas has been sold to resources firm Santos, the same company that's currently being blockaded by farmers on the NSW Liverpool Plains. Former Deputy Prime Minister and Eastern Star Gas chairman, John Anderson, was previously the Federal Member for Gwydir, which covers the Liverpool Plains region.

He says coal seam gas is essential to solving a looming energy crisis. "No one has contradicted me on this yet, but gas is actually going to be very important for agriculture, because it's the obvious extender of hydrocarbons, i.e. oil, as we run out of oil and as oil becomes incredibly expensive," he said. "We've got to find a sensible way to do this in the very interest of food security."

Mr Anderson says there needs to be a rational debate, and that mining and agriculture can co-exist. "I'm not confident as a farmer that there are no risks in some things that farmers do," he said.

The SMH reports that the new carbon tax is accelerating interest in coal seam gas, with Santos moving to acquire the rest of Eastern Star Gas - Carbon tax not the end of fossil fuels, just ask Santos.

HYDROCARBONS have been copping some bad press lately.

What with all the flak over emissions and how best to reduce them, you could be forgiven for thinking the end of the industry is nigh. But the past few days has seen a flurry of takeover activity, starting last Monday with Peabody's $4.7 billion bid for Macarthur Coal and ending the week with BHP Billiton's $14 billion tilt for American gas producer Petrohawk.

Then, before the market even opened yesterday, Santos jumped in with an agreed mop-up of pubescent coal seam gas outfit Eastern Star Gas, valuing the group at just shy of $1 billion. At a nominal 90¢ a share, the deal delivers Eastern Star shareholders a whopping 51 per cent premium to last Friday's closing price.

Rather than spelling the death knell for fossil fuels, it would appear the carbon price arrangements announced last week have partially eliminated the uncertainty that has caused energy and power companies to continually delay long-term investment decisions.

BHP's expansion of its American energy portfolio obviously falls outside the Australian carbon tax proposal but gives a clear indication the mining giant sees a future in lower emissions energy sources as carbon pricing becomes a global inevitability.

It was BHP's chief executive Marius Kloppers who last year reignited calls for carbon pricing while power suppliers like Origin Energy's Grant King have roundly criticised the inordinate length of time it has taken successive Australian governments to implement a carbon pricing policy.
It takes up to eight years to get a power station from the drawing board to the paddock and in the policy vacuum that has existed here for most of the past decade, operators like Origin have been unable to decide whether to build old-style, low-tech operations belching out coal fumes or something a little more modern.

That has left a worrying dearth of investment in power generation, particularly in the eastern states.

It therefore is no coincidence that the junior partner in Santos's latest coal seam gas expansion is the Hong Kong-based TRUenergy which, along with Origin, snapped up the NSW state government-owned electricity distribution companies last year. TRUenergy also owns the Yallourn brown-coal-fired power station in the Latrobe Valley, one of the world's dirtiest.

Under the terms of the friendly deal announced yesterday, Eastern Star Gas shareholders will swap their shares for Santos scrip, giving the Adelaide-based oil and gas group full control. But a second leg of the deal will see Santos emerge with 80 per cent of Eastern Star's gas permits with TRUenergy accounting for the remaining 20 per cent.

Eastern Star has extensive reserves in the Gunnedah Basin but, as a corporate minnow, was always constrained by a lack of capital in developing the resource. Crunch time was approaching, either to joint venture with a much bigger partner for a smaller slice of the future, or merge. ....

Santos will now have a major presence in every eastern Australian onshore gas basin from Moomba in South Australia near the Queensland border to the giant fields of the Bowen and Surat basins inland from Gladstone and in the Otway basin in Victoria.

Just how and where it will ship the gas from the Gunnedah Basin has yet to be decided. It may decide to pipe it up to its new $18 billion Gladstone liquefied natural gas plant, currently under construction. Or it could opt for another port facility at Newcastle.

The SMH has another article looking at the supposedly tight east coast gas supply once the CSG LNG terminals are operational - Santos bid lights up coal seam gas sector.

The $730 million bid by Santos for NSW coal seam gas (CSG) group Eastern Star Gas was a welcome relief from the investor gloom that has characterised the CSG sector in the last 12 months.

Share prices of the CSG companies not yet swept up by the big boys of the industry, with their gas export plans, are popping again, regardless of the on-going environmental campaign against the industry.

Investors are again playing a who-is-next game, driving up CSG share prices across the board. Bow Energy and Metgasco have led the pack, with Dart Energy and Comet Ridge also receiving some new attention.

Julia Gillard has also helped fuel the renewed interest in the CSG sector, with the proposed carbon tax set to drive a shift away from coal-fired power generation to gas-fired power with its 60 per cent lower emissions

But the reality is that with or without the Santos bid and the carbon tax, the CSG sector was due for a return of investor interest on the simple premise that Australia’s eastern seaboard faces a gas shortage, one in which domestic gas prices will have to about double to pull back gas that would otherwise head offshore to higher priced markets.

It is a theme that Morgan Stanley zeroed in on in the wake of the Gillard minority government unveiling its carbon tax plan on July 10. “The era of cheap and plentiful gas in eastern Australia is over,’’ the broker declared. ‘’Steady demand growth and depletion of historical conventional production is leading to a shortage evident after 2014, with CSG and other unconventional gas required to meet the gap.’’

The broker said that it was generally accepted that the carbon tax would increase the use of gas as a ``transition’’ fuel for power generation.

Assume that will increase demand for gas, and a case can be built that annual eastern state gas demand is set to grow from around 720 petajoules in 2011 to more than 1350 petajoules by 2020.

But there isn’t enough gas to meet that sort of growth. Morgan Stanley reckons that existing conventional gas supply (mainly Bass Strait and the Cooper Basin) will be largely depleted within 10 years.

The build-up in CSG resources was meant to flood the market. But there isn’t enough of that either as the multiple gas export projects being built at Gladstone in Queensland will soak it all up to chase the much higher export prices.

Morgan Stanley says the end result of all that is obvious – domestic gas prices are ``likely to escalate sharply to divert high-cost unconventional gas earmarked for export markets back to the domestic market’’.

``We believe this will take effect after 2014 as existing long term contracts wind down and need to be replaced. A gap-up to export parity (about $7.50 a gigajoule) is the likely first step,’’ Morgan Stanley said.

That means those that own gas resources on the eastern seaboard are heading towards a golden era. It also means that we have not seen anything yet in home energy bill shocks.

The recent (optimistic) EIA report into global shale gas resources has local gas producers wondering if a repeat of the coal seam gas boom may be on the cards in Australia, particularly in South Australia and West Australia. The Australian reports on Santos’ interest in this other form of unconventional gas - Energy generators bet on shale gas future.

THE hype about shale gas increased yesterday when Santos chief executive David Knox revealed he is planning to drill an onshore well in the next month to test for the unconventional gas, which has turned US domestic energy markets on their heads.
The move comes on the back of a report by the US Energy Information Agency that said Australia was sitting on the world's fifth-biggest reserves of shale gas and was ready to become a major producer. A revolution in shale gas technology has turned the US from a net importer of gas to one with a surplus in just the past five years, capping gas prices and dashing a host of planned liquefied natural gas import terminals.

The EIA, which is the US Energy Department's respected statistics and analysis arm, completed a study of global shale gas prospects last month and found Australia was one of the most prospective countries for development. "With geologic and industry conditions resembling those of the US and Canada, the country is poised to commercialise its gas shale resources on a large scale," the EIA said.

Santos is planning to drill in the Cooper Basin, which straddles the South Australia/Queensland border. Beach Energy, which claims it has more prospective shale ground than Santos, has already drilled there and is planning to do a frac test -- where the shale is fractured to release gas -- this quarter.

Gas captured in shale does not flow as easily as conventional gas, which is released from the rocks it is found in by pressure alone. The recent technology breakthroughs of the last decade mean the shale can be fractured underground to release the gas relatively economically.

While the Cooper Basin has a good chance to become Australia's first commercial producer of the gas, there are plenty of reasons to keep an eye on companies such as New Standard Energy and Buru Energy. which have grabbed early ground in Western Australia's big Canning Basin. The EIA says the Canning, in the northern part of the state, has 229 trillion cubic feet of risked recoverable reserves, compared to 85tcf in the Cooper and 69tcf in the Perth Basin, where AWE has shale ground.

If the EIA is correct and approximately 385 tcf of gas can be extracted from shale in Australia, this would extend the lifespan of domestic gas production even under a scenario of greatly increased consumption to over a century (thus further undermining any arguments to restrict exports based on resource nationalism - though obviously environmental issues remain, particularly given the experience in the US with unconventional gas extraction).

Adelaide Now has an update an Santos's coal seam gas to LNG plant planned for Gladstone - Santos raises another $420m for Gladstone LNG project.

SOUTH Australian oil and gas major Santos has raised another $420 million in funding for its Gladstone liquefied natural gas project.

The new funding through the Euro hybrid market brings the total amount of hybrid capital raised by Santos in the market to more than $1.4 billion since September this year.

The follow-on issue represents another significant step towards funding Santos' share of the GLNG project, with a planned final investment decision before the end of the year. ...

French company Total recently bought a 15 per cent stake in the GLNG project for $650 million.

The coal seam gas project had also secured more than $100 billion of contracts, making it one of the largest export deals in Australia's history.

Santos has yet to publish an estimate of the cost of building GLNG but analysts forecast it will cost about $16 billion.

The SMH has a report on total buying into a Queensland coal seam gas project - Santos shares slump on LNG stake sale.

French energy giant Total has emerged with a 20 per cent stake in the $7.7 billion Gladstone liquefied natural gas project (GLNG) after 60/40 joint venture partners Santos and Malaysia’s Petronas sold down part of their stakes.

Santos, which agreed to sell a 15 per cent stake for $650 million, said this was the first major investment by Total in an LNG project using unconventional gas - in this case coal seam gas. ...

IG Markets market strategist Ben Potter said the Total deal surprised investors. ‘‘Most were expecting Santos to sell a stake to Korea Gas ... amid widespread speculation it was poised to take a 10 per cent stake,’’ Mr Potter said. ‘‘It seems the market is worried that the rate was at a discount to what Petronas paid for its original stake in the JV two years ago.’’

Santos managing director David Knox the deal with Total was a landmark agreement for the Australian LNG industry. ‘‘We are pleased to welcome Total into the GLNG project as a fully integrated joint venture partner,’’ Mr Knox said in a statement.

Total is one of the world’s largest LNG producers with interests in eight producing LNG projects and one under construction. It also has an interest in the Inpex-led Icthys LNG project in Western Australia’s Browse Basin.

State-owned oil company Petronas said it had entered into an agreement to sell a 5 per cent interest in the GLNG project to Total, which is the world’s fourth largest listed natural gas producer.

Santos, which previously held 60 per cent of GLNG (and Petronas 40 per cent) on Thursday also flagged further deals related to the project with Asian parties.

The ABC reports that environment minister Peter Garrett has stalled Santos and BG's Queensland coal seam gas developments while revised environmental impact studies are being completed - Garrett stalls Qld's coal seam gas projects.

The Federal Government has ordered two mining companies to submit revised environmental impact statements (EIS) for multi-billion-dollar coal seam gas projects in Queensland.

Santos and BG want to convert coal seam gas in the Surat Basin in southern Queensland to liquefied natural gas (LNG) for export from Gladstone in the state's central region.

The Santos and BG developments in Queensland are estimated to be worth more than $20 billion, but have not been given final approval.

But Federal Environment Minister Peter Garrett says he has asked for extra information from both companies on water management strategies.

The SMH reports on speculation that Shell may buy into the company's coal seam gas project - Santos surges on Shell deal talk.

Shares in Santos jumped after the energy company said it is in talks to sell equity in its Gladstone LNG project and collaborate with others, raising expectations it may soon sign a multi-billion dollar deal with Royal Dutch Shell.

Santos said it was in "detailed ongoing discussions" with a number of parties in relation to potential equity and liquefied natural gas sales, and on collaboration between projects.

"These discussions are incomplete and there is no certainty that definitive agreements will be executed by the parties," Santos said in a statement on Friday.

Santos was responding to a report in The Australian Financial Review that it was close to inking a $2 billion deal with Shell to sell a 30-35 per cent stake in the Gladstone coal-seam gas-to-LNG project.

Citing industry sources, the paper said Santos was also close to signing long-term LNG sale agreements with China's Sinopec Corp and state-run Korea Gas Corp (KOGAS) that are worth tens of billions of dollars.

"Shell has indicated that they are open to consolidation and it is only logical for them to talk to Santos since Shell's acreage is land-locked and is located right next to Santos' project, which has a deep-water port good for LNG ship loading," said Di Brookman, an energy analyst at CLSA Asia-Pacific Markets.

The SMH has a report on rumours that Woodside is considering a bid for coal seam gas producer Santos - Santos in Woodside crosshairs .

The Santos share price has risen strongly in the past three weeks on the strength of rumours that Woodside has been sounding out industry personnel about their willingness to join a team for a major venture, now said to be a move on Santos.

Analysts described the Santos rumours as chatter and pointed out that Woodside has its own LNG growth plans to pursue without having to bother with the unknowns of LNG exports from coal seam gas resources. The chatter nevertheless persists.

The theory is that Woodside would sell Santos's non-export gas interests to defray the cost of the acquisition. A bid for Santos has been on the cards since the South Australian government lifted the 15 per cent shareholding restrictions in the company - a throwback to when Alan Bond was stalking the Adelaide company.

The Santos rumour comes as BG Group has jumped to the lead in the race to become the first of the Queensland gas exporters after formally signing a deal for the supply of $50 billion of gas to China.

The signing followed the May 2009 agreement with China National Offshore Oil Corp for gas sales from its proposed Curtis LNG project near Gladstone.

The agreement covers the supply of 3.6 million tonnes of LNG annually over 20 years. The value was not disclosed and is dependent on oil price assumptions. A range of $40 billion to $60 billion is expected.

It ranks as one of the biggest LNG contracts ever written and has particular importance because it is the first fully-termed sales and purchase agreements for the supply of LNG from coal seam methane, as distinct from an understanding to buy on terms yet to be decided.

Following its 2008 takeover of QGC, BG is laying claim to a resource base to underpin the Curtis LNG development of 13.5 trillion cubic feet. The deal with CNOOC also means that the project is now fully sold on its planned output of more than 8 million tonnes of LNG annually. Previous supply deals with Singapore and Chile have been struck.

BG plans to have the plant on Curtis Island come on stream in 2014.

Santos recently raised their gas reserves (largely due to new coal seam gas exploration) by 42 per cent, saying "the reserves upgrade brings its total reserves to 1.44 billion barrels of oil equivalent at the end of 2009".

They now say they have enough gas to proceed with the first phase of their Gladstone based LNG project (partnering with Petronas), noting that total 2P reserves for the project were 4,003 petajoules as of December 31.

Santos CEO David Knox recently made an address to the Melbourne Mining Club, spruiking the proposal that brown coal fired power stations in Victoria be replaced with gas fired power, and pointing out that the Cooper Basin may have more life in it than many think, courtesy of shale gas - the Business Spectator has a report - Gas game changer.

In the address Knox forecast that, in time, the share market would come to understand the enormity of the Santos gas reserves and how they can supply both the export LNG markets at export prices and the local markets at prices that are based on current low levels, plus an inflation adjustment.

In particular, he said, over time there would sufficient gas to replace the four Victorian brown coal power stations, which are one of Australia’s biggest sources of carbon emissions.

The eastern Australian export gas would come from Gladstone, while Gunnedah gas in NSW could be used for both export and local. But then he added a third source – the Cooper basin. Until relatively recently, the Cooper basin has been seen as a dying field but Knox said that the new technology to extract gas from tight shale rocks opens up a new opportunity for the basin to supply NSW, Victoria and South Australia. ...

Knox pointed out that Exxon has paid $US40 billion for a shale gas deposit in the US. No one is suggesting that the Cooper basin is worth anything like that, but its significance to Santos and to Australia was dramatically underestimated until today’s Knox address.

Knox has warned that the natural gas market in the Asian region is becoming very competitive as the US becomes self-sufficient in gas. Nevertheless he believes that the potential in the international market has been underestimated because of the carbon reductions it offers.

Beach Energy has also been showing interest in Cooper Basin shale gas, with chief Reg Nelson claiming unconventional gas had the potential for “a very large gas resource in the order of many tens of trillions of cubic feet that could begin to approach the CSG reserves of Queensland".

Oil and Gas Journal says that Drillsearch Energy are the other company active in the unconventional gas sector in the Cooper Basin.

If Nelson is correct, this would further expand Australian gas reserves, extending their lifespan even under a scenario of greatly increased consumption to around a century (and thus further undermining any arguments to restrict exports based on resource nationalism - though obviously environmental issues remain, particularly given the experience in the US with unconventional gas extraction).

Environmental concerns are also dogging the coal seam gas industry, with farmers starting to resist developments in rural Queensland. The Brisbane Times has a report - Farmers wonder if LNG is worth its salt.

The Darling Downs area in Queensland is not exactly a hot-bed of anti-business radicalism. The prime agricultural region - which has also found itself in the midst of the energy boom - held the seat of the former premier Joh Bjelke-Petersen, while the office of the Nationals senator Barnaby Joyce is in nearby St George.

But in response to energy companies' plans to extract billions of dollars worth of gas from the area's underground coal, normally conservative farmers are shaping up for a fight with big business.

A clutch of energy giants are planning to use the area - part of the Surat Basin in the state's south - as a source of gas to four separate liquefied natural gas (LNG) export plants in Gladstone. All want to make final investment decisions this year, in time to catch a predicted upswing in Asian energy demand and ship their first gas from about 2015.

Mirroring a bitter stoush between farmers and miners in NSW, farmers north of the border are questioning if cashing in on the energy boom might threaten the environment they depend on.

But this is not just a debate over environmental impacts and regional development. The battle highlights an emerging tension between resources development and the rural economy, which could provide another hurdle to the LNG industry's ambitious expansion plans.

One of the most problematic byproducts from coal-seam gas extraction - which requires drilling thousands of holes for each LNG plant - is salt. ''It's toxic to the plants, it's toxic to the soil, it's toxic to the animals,'' said Ian Hayllor, a grain, oilseed and cotton farmer based 250 kilometres west of Brisbane.

AgForce, a peak organisation representing rural producers, says the coal-seam gas projects proposed in Queensland could produce up to 50 million tonnes of salt over the projects' lifetime, suggesting it should be renamed the ''salt-mining industry''.

Salt cannot be burnt or sent into the ocean. It needs a commercial use, but the LNG companies have not yet found one. Santos, one of the LNG proponents, has said trucking the salt to other parts of the country is not economically viable; others are still looking for alternatives.

Mr Hayllor's other concern involves the most valuable commodity of all in these parts: water. It is produced in abundance by the drilling process. Up to 36,000 wells may be drilled in Queensland over the next three to five years.

While the "waste water" could be treated and put to use, Mr Hayllor said the intensive drilling also threatened a shallow aquifer in the Darling Downs that supplied towns, businesses and farmers.

UPI has a report on yet another Australian LNG project, this one in the Timor sea - GDF Suez, Santos reach Australian LNG deal.

French energy giant GDF Suez signed an agreement with its Australian partners at Santos to develop three offshore gas fields in Australia, the company said.

GDF Suez announced a $200 million deal with Santos that concludes plans launched in August to develop its Bonaparte liquefied natural gas project. The integrated project envisions the construction of a floating liquefaction plant with a capacity to produce more than 2 million tons of LNG per year.

The project relies on gas resources from the Petrel, Tern and Frigate gas fields in the Bonaparte gas basin in the Timor Sea, which GDF Suez described as one of the richest gas regions in Australia.

Bloomberg has an article on Australian natural gas and coal seam gas companies Woodside and Santos - Santos, Oil Search of Better Value Than Woodside, JPMorgan Says .

Santos Ltd. and Oil Search Ltd., which are developing liquefied natural gas projects in Asia Pacific, are of “superior” value to Woodside Petroleum Ltd., JPMorgan Chase & Co. said.

“Woodside is overvalued versus peers based on our capital expenditure estimates for its LNG projects, and also given greater uncertainties in LNG growth,” Mark Greenwood, a Sydney- based analyst for JP Morgan, said in a Jan. 22 note to clients.

Woodside, operator of Australia’s North West Shelf LNG project, is building a A$13 billion ($11.8 billion) LNG project in Western Australia, and planning new ventures at Pluto, Sunrise and Browse gas deposits.

“We do not think Browse and Sunrise are at a mature enough stage currently to secure heads of agreements, and timely exploration success is required for Pluto-2 to meet its target final investment decision date at the end of 2010,” Greenwood said. ...

East Timor will block Woodside’s plans to develop the Sunrise LNG plant, the Associated Press reported this month, citing a statement from Secretary of State Agio Pereira.

Gas deals in Australia and PNG seem to be the hot topic of the week - the latest one is Wheatstone customer TEP signing up another supplier in Papua New Guinea. The SMH reports - Tokyo latest to sign for PNG gas.

THE $US15 billion ($A16.2 billion) Papua New Guinea liquefied natural gas project has signed another off-take agreement, this time with Japan, as the joint-venture partners prepare to give the development the go-ahead today.

Joint-venture partners ExxonMobil (which owns 41.5 per cent), Oil Search (34 per cent) and Santos (17.7 per cent) told the market late yesterday that Tokyo Electric Power Company had signed on to receive 1.8 million tonnes of LNG annually over 20 years.

This was two days after TEPCO signed Australia's largest trade deal to receive 4.1 million tonnes of LNG from Chevron's Wheatstone project in Western Australia in an agreement worth a reported $90 billion.

The TEPCO/ExxonMobil deal provided further evidence that the PNG project would get the green light today and came after China's Sinopec said last week it would take 2 million tonnes a year from the 6.3 million tonnes-a-year project, which would deliver first gas by late 2013 or early 2014.

The Age reports that activity in the coal seam gas sector continues unabated, with Santos looking to add to its position in the Gunnedah Basin, which is estimated to contain 50 tcf of gas - Santos turns up heat on gas plans with $476m Gunnedah deal.

SANTOS has bought a large stake in a company with neighbouring gas fields and advanced technology in NSW's Gunnedah Basin, so it can speed up the extraction and delivery process for its own coal seam gas reserves.

Santos yesterday bought a 20 per cent stake in Eastern Star Gas from Hillgrove Resources for $176 million, and paid Gastar Exploration $300 million for its 35 per cent interest in exploration permits and production areas operated by Eastern Star.

"The transaction … provides a basis for each party to work together to accelerate the development of the region and a range of commercialisation opportunities, including domestic gas supply, power generation and future LNG (liquefied natural gas) options," Santos chief executive David Knox said.

Santos is drilling 23 wells in the Gunnedah Basin, which it entered in 2007.

Spokesman Matthew Doman told BusinessDay that Santos would benefit from Eastern Star's knowledge of the local geology. "We are now pretty much in a joint venture," he said.

The combination of operated coal seam gas permits belonging to Santos and Eastern Star in the Gunnedah Basin covers an area of about 63,000 square kilometres, containing resource potential estimated to exceed 50 trillion cubic feet.

"What Santos brings to the table for us is more understanding of market growth opportunities," said Eastern Star managing director David Casey.

Santos is building a $7.7 billion facility in Gladstone, Queensland, with Malaysian gas company Petronas to store and transport liquefied natural gas (LNG) to Asia.

Mr Casey said the gas was unlikely to travel all the way from Gunnedah to Gladstone, and he would like to see LNG transportation facilities built in Newcastle.

He said Eastern Star had spent seven years developing its extraction technology in Gunnedah, where the coal lies parallel to the surface and must be extracted sideways.

The Economic Times Of India has an article speculating that foreign oil majors may be eyeing Santos as a takeover target - BP, Shell eye Santos; China bid unlikely.

Global energy giants BP, Eni and Shell are eyeing possible bids for Australia's No.3 oil and gas firm Santos, which one analyst
valued at around $7 billion, but a bid from China looks unlikely, dealmakers say. Takeover speculation has swirled around Santos, which has a strong balance sheet and coveted liquid natural gas (LNG) prospects, since Nov 29 when a government cap on foreign ownership expired.

Its shares soared 16 percent on Dec. 8 after a media report said China National Petroleum Corp (CNPC), parent of PetroChina, may bid. But with Australia reviewing a raft of Chinese investments, including Chinalco's contentious $19.5 billion deal with miner Rio Tinto, alarm bells are ringing in Canberra that China Inc might end up owning too much of Australia before the global financial crisis ends. That makes a CNPC bid highly unlikely, dealmakers say.

"The Chinese realise they cannot succeed with a hostile bid," said a Hong Kong-based investment banker with direct knowledge of the matter. CNPC spokesman Liu Weijiang said he did not have any knowledge of the situation when contacted by Reuters. The banker added that BP, Eni and Shell are looking at Santos, but a formal process is not yet in place. "The hawks are swirling," the banker said. ...

Some analysts say BP is underexposed to LNG and Santos would help it build a portfolio to better rival its peers in the top tier of the oil industry. Eni is also a credible suitor, analysts say, with the Italian major having said it is keen to expand into Papua New Guinea for its gas potential. It is a partner with Santos in the Bayu-Undan LNG Project.

It appears Santos are backing up their recent bullish talk about coal seam gas with actions, with the ABC reporting they have started recruiting for their CSG LNG project in Gladstone - Santos begins recruiting 600 staff for LNG plant.

Mining company Santos has begun a recruitment campaign to find staff for its liquefied natural gas (LNG) plant on Curtis Island, near Gladstone. Santos yesterday announced it will set up an office in Brisbane for up to 600 staff involved in the project. The initial engineering and design work is expected to begin next month.

Company spokesman Roger Kennett says the $7 billion project has not been affected by the global financial crisis. "We're conveniently placed - we're in the energy industry but we're in gas and in particular with our coal seam gas its a very clean energy," he said. "That puts us well-favoured in this particular turndown. It's not impacting our business as such and we're still in a growth phase."

The ABC reports that the local coal seam gas industry is remaining bullish about its prospects - Qld gas industry remains safe from financial crisis.

One of Queensland's largest gas providers, Santos, says the sector has been insulated from job losses which have hit the mining industry. Several companies, including Xstrata, Macarthur Coal and Oz Minerals, have announced more than 500 job losses in the past month as a result of the global financial crisis.

However, Santos says the demand for energy from clean sources remains strong. Santos commercial vice-president Rick Wilkinson says any short term downturn in the market will not have any impact on long term projects.

Mr Wilkinson says the company is on track to deliver the world's first coal seam gas to liquefied natural gas project in Gladstone in central Queensland by 2014. "I think generally there is a long term gas demand," he said. "I think that the emissions trading scheme that is coming in will favour gas - it's a clean energy and will be a nice bridge to the renewable gas, renewable energy requirements of the future."

Santos says retrenched coal miners in Queensland may find jobs in the gas industry.

Santos operations vice-president Roger Kennett says the company plans to hire 120 staff over the next four months.

Mr Kennett says coal miners' skills would be needed on some of its coal seam gas projects. "Field development, where there is a lot of drilling going on, a lot of exploration, pipelines will need to be installed - those local communities will be looking for additional resources," he said. "Certainly there are opportunities out there if those people have the skills to turn that way."

Anglo Coal doesn't seem too interested in CSG though, selling its interests to focus on digging up the dirty stuff - Company plans to sell central Qld mine.

Mining company Anglo Coal Australia is planning to sell its coal seam gas interests in the Dawson area in central Queensland. The company says the move will allow it to concentrate on developing its coal mining operations near Moura.

The SMH reports the Reindeer gas field and Devils Creek processing plant projects in WA may go ahead after all - Apache, Santos to revive WA gas project.

Apache Corporation and Santos are seeking to revive a $900 million natural gas project in Western Australia after signing an accord to sell the fuel to an iron ore venture proposed by Citic Pacific.

The restart of work on the project, involving the development of the Reindeer gas field and the onshore Devil Creek processing plant, depends on signing contracts for engineering and construction by mid-March, Houston-based Apache said in a statement yesterday. Previous contracts worth $390 million with Clough Ltd. were scrapped last month after the project was halted.

Citic Pacific said yesterday a unit had signed an agreement to buy gas from the Reindeer project for seven years starting in the second half of 2011. The contract is worth $US1.3 billion, assuming an oil price of $US50 a barrel, it said. The value of Australian mining and energy projects fell 4% in November from April as the economic outlook worsened, the government's commodities forecaster said.