New South Wales ends CSG royalty holiday, moves to ease regulatory burden Monday, June 25, 2012 by Bevis Yeo
New South Wales has ended the royalty holiday exempting coal seam gas producers from paying royalties for the first five year of production.
Both CSG companies and oil and gas industry body Australian Petroleum Production & Exploration Association (APPEA) both said the move to end the royalty holiday, which was intended to encourage coal seam gas investment, would increase costs.
However, they said the State’s appointment of a Land and Water Commissioner was a more important step forward as it provided transparency and independent oversight that could ease regulatory burdens on all stakeholders.
APPEA said the appointment would ensure the gas industry’s benefits are delivered to local communities and that the challenges raised by the industry’s growth, are addressed
Santos (ASX: STO) proved this point, saying it would set up a compensation scheme and a community benefit fund in New South Wales to pay out $150 million dollars to farmers over 20 years.
It added that it would not force farmers to accept gas developments where they were not wanted.
A framework allowing for coal seam gas exploration and development to proceed would also be valuable to junior companies such as Red Sky Energy (ASX: ROG), Comet Ridge (ASX:COI) and Acer Energy (ASX: ACN).
Red Sky is currently looking for a rig to drill its Talma pilot production well in the Clarence Moreton Basin after getting approval from the State Government early May.
The Talma-1 gas discovery had intersected a 83 metre gross gas column from an interval of between 480 metres and 563 metres and had flowed gas at a rate of 28,000 cubic feet per day during drill stem testing of a 10 metre interval from 545 metres to 555 metres
No upper seal or structure was identified leading the company to say that further drilling was required to determine if the discovery represented an unconventional resource that extended over a large area with a potential gross gas charged column of about 200 metres.
Should this be the case, Red Sky could have a potentially large play in its hands as the Kangaroo Creek Sandstone covers 324 square kilometres within PEL 457 and PEL 479.
Meanwhile, both Comet Ridge and Acer Energy have expanded their acreage positions in the Gunnedah Basin and Darling Basin respectively. Both companies have bought their new stakes from Petrel Energy (ASX: PRL), which now has just one permit remaining in the Gunnedah.
Comet Ridge plans to shoot seismic over its acreage later this year while Acer will focus on uncovering evidence of a working petroleum system.
Gas investment to benefit Australia
The increased certainty for coal seam gas investment would be needed if New South Wales is too benefit from the benefits that gas industry is poised to deliver to Australia.
With more of the half of global liquefied natural gas projects now under construction located in Australia, the sector could deliver up to A$185 billion in investment, over 64% of all committed investment in Australia.
APPEA said the results of the Deloitte report it had commissioned highlighted the opportunities that Australia’s oil and gas industry presented to Australia.
It added that Australia needed to capitalise on these opportunities by putting greater attention on measures and settings that facilitate effective reallocation of resources from lower performing capital-intensive industries to the resources industry.
APPEA also warned that rising development cost and risks of unwarranted regulatory interference could undermine the economic payoffs from this boom and lead to long-term supply contracts being lost to other resource exporters.
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