Santos rejects call to reserve gas for Australian industry

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Setting aside natural gas resources for the nation’s own use would be counterproductive and could leave gas in the ground at a time when new supplies need to be developed, says oil and gas producer Santos.

Santos chairman Peter Coates said on Thursday that a note of caution should accompany recent calls for the reservation of some domestic gas resources exclusively for Australian industry.

Mr Coates also said NSW could face significant gas supply shortages from 2017 if it did not develop its rich coal seam gas (CSG) resources without delay.

“As reasonable as this (gas reservation) may sound on the surface, such government intervention could prove counter-productive for both Australian industry and the nation,” Mr Coates told shareholders at the company’s annual general meeting in Adelaide.

He said the development of a large-scale gas industry, driven at least initially by export opportunities, was the best path.

Mr Coates said eastern Australia had abundant natural gas resources, particularly in coal seams.

“But, the cost of extraction is increasing as is the cost of processing and distribution,” he said.

“A gas reservation policy will do nothing to change those realities.”

A gas reservation policy that did not recognise the true cost of gas extraction could see gas left in the ground, he said.

He said new supplies of natural gas needed to be developed if Australia was to satisfy its growing demand for electricity while containing domestic power price rises.

This was particularly true of NSW, which had to import around 95 per cent of its gas needs, mainly from South Australia and Victoria.

Mr Coates said that following the acquisition of Eastern Star Gas in 2011, Santos had the largest natural gas position in NSW.

“While there has been considerable public debate about coal seam gas, particularly in that state (NSW), the fact is, CSG can be extracted and produced safely,” Mr Coates said.

“After all, that is what we have been doing in Queensland for more than 15 years.”

Santos shares were down five cents at $14.11 on Thursday.