Today's Fairfax article doesn't question the ethics of CSG mining, rather, it questions the Government's decision to give the green light to three, and soon, four massive projects in the one area.
CSG is not the evil industry that it is painted. It produces liquified natural gas, which ticks many environment boxes. The problem highlighted on the 4 Corners program related to the dredging at the port of Gladstone. This dredging is occurring to make way for the massive numbers of ships. If Government had not bent over backwards to appease mining because of the huge dollars and many jobs they provide, this would not have happened. The Queensland Government should have insisted that the port be Newcastle. This means that the dredging would not have occurred.
Also, as highlighted in the report, the amount of water all four projects use combined is phenomenal. Once again, it is a case of Australian governments - Federal, State and Local, getting windfalls for short term gains, at the expense of the long term.
November 11, 2011 - 9:01AM
Investors might be interested to know why Australian Ethical Investments recently sold out of Origin Energy.
A hint is that it wasn't related to the company's profits.
Origin, alongside BG Group (British Gas) and Santos, is involved in the $50 billion worth of coal seam gas projects based in Gladstone, Queensland.
They are mostly located in the Surat Basin, which is part of the Great Artesian Basin, and will enable liquid natural gas (LNG) production from 2014 onwards. Shell's Arrow CSG project is also slated for a few years' time, and could be worth another $30 billion.
What's a billion here or a billion there, you might ask. After all, CSG produces LNG, which is less harmful to the environment than petrol (although fugitive emissions may put that general claim in doubt).
Australian Ethical is concerned that the four operators use excessive water in their fracking or de-watering operations, which is how they suck the gas out of porous coal. Interestingly, the team doesn't have a problem with the chemicals used in the process.
“We expect that during the ramp up, CSG will take up more water from the Great Artesian Basin than is used in agriculture, so as a precautionary measure have sold our Origin shares” says Andy Gracey, the small cap fund manager with Australian Ethical.
In case you didn't know, with an area of over 1.7 million square kilometres, the Great Artesian Basin is one of the largest artesian groundwater basins in the world. It stores a huge volume of water that is estimated (by the Queensland Government) to be 64,900 million megalitres, which is enough water to fill Sydney Harbour 130,000 times.
Three of these big projects have the green light from the Government and their financiers, so they will happen. But there have been significant delays and there is a groundswell of opposition from the public. Government has clearly been caught out, approving projects one after the other, and not envisaging what happens when you get four giant projects operating in the one (albeit big) area.
Meanwhile, elsewhere on the small cap front…
At the smaller end of the spectrum, there are some interesting opportunities for investors.
Metgasco (ASX code MEL) could be a takeover target with two corporates moving onto its share register over the past two months.
LNG Limited (LNG) went over 10 per cent earlier this month; and ERM Power announced this week that it has just over 7 per cent.
One analyst said that Metgasco has a “large resource of CSG” in the Clarence Moreton Basin in NSW, which means if it goes into production it will be high cost. It has also been frustrated, like other bigger producers, with the slow approval process of the NSW Government.
Molopo Energy (ASX code MPO) on the other hand, is trading at levels below its asset backing. The company has CSG assets located near Gladstone, which it is selling. One estimate is that it could get about $50 million for this, plus it has about $130 million in cash. At 71.5 cents as of yesterday it has a market cap of $174 million.
Molopo is shifting its focus towards North America where it figures it can make money more easily from extracting oil and gas from shale rock.
Westside Corp (ASX code WCL) is far from a musical, also operating CSG assets close to Gladstone. It's not a huge asset, but it's up and running and producing a fair amount of cash. If there is corporate activity in the sector, this company, whose market cap is $71 million, could be a target.