Though separated by only a day in time, announcements from Chevron and Santos were a country mile apart in quality.
Chevron, and its partners, reported that the first commercially significant sale of gas from the Gorgon project had been made.
Santos said it had completed the purchase of the Tipperary coal seam methane (CSM) project.
One was unquestionably exciting news. The other was, well, ho-hum because, no matter how hard he tries, The Slug simply cannot get excited about CSM.
The Chevron deal, while still subject to a final development commitment on Gorgon, involves the purchase of 1.2 million tonnes a year of liquefied natural gas by Tokyo Gas, the same Japanese company that led the purchase of gas from Woodside’s North West Shelf project almost 20 years ago.
In signing up, Tokyo Gas becomes the first non-participant to buy gas from Gorgon. Other deals have been with partners in the project: Chevon, Shell and ExxonMobil.
From where The Slug sits, the Gorgon sale to Tokyo Gas, or whoever, is terrific news for a project that has been dogged by its remote location, big volumes of inert gases, and the struggle to find a suitable processing site on land.
By the middle of next year, assuming all the residual environmental questions are answered, Gorgon will become Australia’s biggest resource development project, so far.
Meanwhile, over at Santos there is far less to celebrate, and a few questions that shareholders should be asking.
Buying Tipperary is billed as a big event, but is it really?
CSM, interesting as it is, and fast-growing in some gas-hungry markets, is simply not the real thing when compared with conventional natural gas.
Sure, a molecule of methane is a molecule of methane, wherever it came from. But, some molecules are a lot easier to get out of the ground than others, and in some places they occur in much greater concentrations.
Getting CSM out of the ground is like sucking through a straw, and sucking awfully hard at that.
In fact, the difference between CSM and ‘real’ gas is so profound that some shareholders at Santos might be asking why are we bothering. What’s so wrong with the real thing that we have to spend $US466 million buying Tipperary so we can get access to the Fairview CSM field near Roma?
The answer is that Santos can add value to the Fairview CSM because of its extensive central Australian gas infrastructure, and that it has gas sales contracts in place which ensure a ready market for Fairview gas.
But, there is a nagging question in back of The Slug’s mind that goes like this. Does Santos actually need Fairview because it can see a long-term shortfall in production of its own conventional gas? Perhaps, is the only answer to that question.
An even more pertinent question is whether Santos is applying too much of its money and management time on what are really small, bolt-on, deals while other players in the Australian oil and gas game get on with the far, far better thing of developing real major gasfields.
