Australia, New South Wales’ lack of a natural gas industry is sparking concerns among businessmen. NSW is the only mainland Australian state without a significant natural gas industry, leaving it to import more than 95 percent of its gas requirements from Victoria’s Gippsland Basin, from the northwest’s Cooper Basin, and from Queensland's coal-seam gas fields.

As Australia’s natural gas industry prepares to ramp up liquefied natural gas shipments to East Asia, businessmen are arguing that it is time for NSW to develop a robust indigenous natural gas industry in order to cope with future changing supply patterns.

Australia is rich in energy reserves, which include fossil fuels and substantial uranium reserves, and is one of the few Organization for Economic Cooperation and Development members that is a significant net hydrocarbon exporter. According to government sources Australia currently exports over 70 percent of its total energy production.

According to the World Nuclear Association Australia has the world's largest recoverable reserves of uranium, roughly 31 percent, and is the third largest producer and exporter of uranium for nuclear-powered electricity, behind Kazakhstan and Canada. In 2011 Australia was the world's second largest coal exporter and the third largest liquefied natural gas exporter in 2012.

Geoscience Australia in 2011estimated that the country possessed 136 trillion cubic feet of natural gas reserves, along with 33 tcf of coal bed methane deposits. An estimated 92 percent of the natural gas resources are located offshore in the North West Shelf Carnarvon, Browse, and Bonaparte basins, and most of the country’s current production of natural gas is from 10 super-giant fields even though there are nearly 500 fields included in the country’s overall resource count. According to the 31 June 2012 U.S. government Energy Information Agency “Technically Recoverable Shale Oil and Shale Gas Resources” report, Australia also has an estimated 437 tcf of technically recoverable shale gas reserves, dispersed throughout the inland Cooper Basin, eastern Maryborough Basin, the offshore southwestern Perth Basin and the northwestern Canning Basin.

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Major domestic and international natural gas extraction companies operating in Australia include South Australia Northern Territory Oil Search (Santos Ltd.), Woodside, Chevron, ConocoPhillips, ExxonMobil, Origin Energy, BG Group plc, Apache Corporation, INPEX Corporation, Total, Shell, and Statoil. Chevron holds Australia’s largest gas resources and since 2009 has made 21 discoveries in the prolific Carnarvon Basin, adding 10 tcf to Australia’s proven gas resources. The recent stream of LNG, CBM and shale gas projects have also attracted Asian companies including Sinopec, China National Offshore Oil Corp., Tokyo Gas, and China National Petroleum Corp., that are interested in purchasing not only gas for markets in China and Japan but also upstream assets slated to supply these projects.

Santos Ltd. vice-president James Baulderstone maintains that in light of the rising energy exports situation creating the possibility of higher prices and shortages, NSW should develop its own already known natural gas reserves, which “represent a major opportunity to take a positive step towards securing NSW's energy supply for many decades,” adding, “Santos has the potential to develop significant resources around Narrabri that in the first phase of development alone can supply in excess of 25 percent of NSW's gas needs, and which we are committed to delivering to NSW customers.”

Santos Ltd. is certainly eager to turn around NSW’s fortunes. On its company website it proclaims, “An Australian energy pioneer since 1954, Santos is a leading oil and gas producer, supplying Australian and Asian customers. With its origins in the Cooper Basin, Santos is one of Australia’s largest producers of gas to the domestic market and has the largest exploration and production acreage position in Australia of any company.

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Santos has also developed major oil and liquids businesses in Australia and operates in all mainland Australian states and the Northern Territory. Santos also has an exploration-led Asian portfolio, with a focus on three core countries: Indonesia, Vietnam and Papua New Guinea.”

While Baulderstone’s comments are evidently self-serving, the reality remains for NSW that increased Asian demand for Australian LNG produced in other states is unlikely to benefit NSW in the long term, so Sydney bureaucrats may as well acknowledge the validity of Baulderstone’s statements and begin negotiations, as at least Santos Ltd. is an Australian company, unlike many of the energy firms currently competing for a slice of the Australian energy pie.

By. John C.K. Daly of Oilprice.com