Asia buzzing around LNG industry
ALAN KOHLER, PRESENTER: Speaking of Comet Ridge, here's its CEO Tor McCaul, currently perforating 3.6 million acres of Queensland with holes looking for gas.
Well Tor McCaul there's a lot of interest in the stock market now around coal seam gas. Does it feel to you like there's a bit of a gold rush going on?
TOR MCCAUL, MD, COMET RIDGE: I guess the answer to that is yes and no. I think when you get out in the market and talk to people and meet people you do get the sense that they feel that.
I think that from our point of view working it day to day, it just feels like normal business but there is certainly a buzz around.
ALAN KOHLER: Is there a danger that with all the money floating around it'll get taken over by spivs as often happens with booms like this?
TOR MCCAUL: No, I don't think so. I guess spivs probably exist in all walks of life but I think the market's pretty smart and I think the market can pick those that sort of know what they're doing and those that don't.
ALAN KOHLER: You've got a lot of ground in the Galilee basin in Queensland that you're drilling. How far off are you from getting some certified reserves?
TOR MCCAUL: That's a good question. We've got about 3.2 million acres, about 13,000 square kilometres under licence in Galilee.
That was awarded to us late last year and due to the wet, we've only been able to date to get two wells drilled so we're hoping for a bit of dry now and we'll get back to it but really at this stage for us it's early phase exploration.
We're drilling core holes, we're getting coal to surface so we can measure the quality and properties of the coal and reserves are something we turn our focus or our head to later in the year after we've got our core holes drilled and we get to sort of sit back and look at it from a helicopter view if you like and look at what potential resource we might have.
ALAN KOHLER: And can you fund all the drilling yourself?
TOR MCCAUL: Yeah we can, at the start of the year, end of the last quarter we had $21 million in the bank so we're well-funded for the next 12 to 18 months and certainly to see us through the program that we're doing in Queensland and also some of the pilot wells we're doing in New Zealand so we're fine for this year and into next year.
ALAN KOHLER: But in any case are you getting some big players knocking on your door trying to get involved to partner up with you?
TOR MCCAUL: Well there's certainly people out there, bigger companies out there who are interested to talk to us but at the moment we've got 100 per cent equity in these two big Galilee blocks and we're quite happy to control our own destiny.
There may come a time later on as we move to booking reserves and looking at what it is we want to develop, that we might decide it is the right time to talk to people but right now we're quite happy to be masters of our own destiny.
ALAN KOHLER: And you're not worried about missing the boat, I mean there's a lot of big deals going on, both sales contracts and big equity deals. You're kind of bringing up the rear. That's not a problem is it?
TOR MCCAUL: No, no we don't feel that, that's a question we're asked occasionally but we think the LNG business is a long-term business. It's not something that comes and goes rapidly.
People build LNG projects for 20, 30, 40 years. We think this year will be an opportunity for third party gas and next year and the year after, we think the big boys that are building the LNG projects will initially start to supply those projects with their own gas but there will be opportunity for companies like Comet Ridge to sell gas into these projects and also to sell gas for domestic use, for power, for compressed natural gas, for small scale LNG and we saw the first of those small scale LNG projects announced a week or two ago with BG, BOC and Chinchilla.
ALAN KOHLER: You've had some experience with LNG in Asia. What are the Asian buyers looking for in LNG?
TOR MCCAUL: Yeah that's interesting. I was fortunate to spend four years between 2000-2004 in Indonesia on Bontang which was a 23 million tonne project, the biggest LNG project in the world and we sold a lot of volume into Japan, Korea and Taiwan and particularly the North East Asian buyers, they really need security of supply.
They need to know that if they're booked for 50 cargoes for the year, that they'll get 50 cargoes for the year.
They also like flexibility of supply if they can get it, and it's not always easy to get but if they can get a few more cargoes in winter and a few less cargoes in summer then they're quite happy for that and the third thing really for them is price but the other things are more superior to price for them.
ALAN KOHLER: Is there competition between the east coast, Queensland and the west coast, offshore WA for these big LNG markets in Asia?
TOR MCCAUL: I think the market out there is large, I think it's very large, and I think there's two parts to the Asian LNG market.
The first part is simply the growth in the total energy market in Asia. Having spent four years in India I got a sense for just how many people are out there and want to move into the middle class and who want a car and a television and electricity coming into their house every day.
So I think the demand for Asia, for gas in Asia and for energy in Asia, will continue to increase.
But also the gas mix in that energy supply at the moment is relatively small. Even a few years ago when I was working LNG, Japan only had about 12 per cent of its energy mix as gas and there's a lot of potential for Japan and China and Korea to move further up the gas curve as their gas demand grows.
So I think we'll see demand in Asia for gas continue to increase and I think the companies coming into the business here in Queensland have a very long term view of that. They're not worried about blips in the road that occur over one or two years, they're more concerned what's happening in five, 10, 15, 20, 30 years.
ALAN KOHLER: And what about the west coast, is there enough for them?
TOR MCCAUL: We do probably of course have the same potential gas customers but the west coast have done us a great favour in as much as they tend to pull a pin out and throw a grenade our way occasionally.
North West Shelf's been a very very steady, reliable LNG supplier for over 20 years and I think that's incredibly important to buyers, whether they are Japanese, or Korean or Taiwanese or Chinese, and I think that shows what Australia can do and I think that will stand the Queensland businesses, that are starting now or moving into starting to get close to FID now, I think that'll stand those projects in good stead when they come to sit down across the table with their buyers and I think we've seen that recently with the BG CNOOC deal, that Australia will have a tremendous reputation with LNG going forward.
ALAN KOHLER: Thanks for joining us Tor McCaul.
TOR MCCAUL: Thanks very much for having me on Alan.