The Market Place

Apex Energy NL has two separate resources, coal seam gas (CSG) and coal mine gas (CMG). Although the gas has similar characteristics the markets are the slightly different. CMG in the future should attract government subsidies via the proposed CPRS if electricity is generated onsite and availability to be drawn "on demand" for peaking power generation is a distinct commercial advantage. Whilst CSG may not draw subsidies it is the coal replacement fuel of choice for power generation and increasing use in industrial applications. These economic drivers, combined with the close proximity of the APEX gas resources to pipelines, the electricity grid, existing and planned power stations will determine the most profitable markets for APEX's future gas sales. As such the current market consists of the following.

CSG

Coal seam gas is extracted directly from the different strata of coal seams. Methane content of the extracted gas varies with location and geology.

The Potential Markets for CSG:

  1. Sold to Local Power Generation Facilities: Examples are TRUenergy's Tallawarra Power Station and EDL's Power Stations at Appin.
  2. Sold to the Gas Grid: To be compressed and injected into the nearest gas pipeline. AGL Ltd operates an existing plant approximately 20 kilometres from Apex's Eastern and Western gas tenures. Gas can be piped to this existing plant and treated before being fed into the main gas pipeline.
  3. On-Site Electricity Generation: To use the gas to generate electricity on site and feed it into the electricity grid
  4. LNG Sale: To sell the gas to an LNG off take partner via the nearest gas pipeline (Needs Conditioning)
  5. Fertiliser production: Production of ammonia for Fertiliser
  6. Other small gas consumers such as the Ingham poultry facility at Appin (20 kilometres from Apex's gas tenures

CMG

Coal Mine Gas is extracted from old coal mines and tends to contain between 50% and 80% methane gas. As it is less concentrated it may need to be conditioned and/or concentrated before it can be used. This is not the case for all applications. In some cases methane percentage as low as 40% is used for industrial heating and power generation.

The Potential Markets for CMG are:

  1. Sold to Local Power Generation Facilities: Examples are TRUenergy's Tallawarra Power Station and EDL's Power Stations at Appin.
  2. Sold to the Gas Grid: To be compressed and injected into the nearest gas pipeline (Needs Conditioning). AGL Ltd operates an existing plant approximately 20 kilometres from Apex's Eastern and Western gas tenures. Gas can be piped to this existing plant and treated before being fed into the main gas pipeline.
  3. On-Site Electricity Generation: To use the gas to generate electricity on site and feed the power into the electricity grid
  4. LNG Sale: To sell the gas to an LNG off take partner via the nearest gas pipeline (Needs Conditioning)
  5. Coal Preparation Plants: CMG can be used to fuel the thermal dryers that remove surface moisture from coal.
  6. Other small gas consumers such as the Ingham poultry facility at Appin (20 kilometres from Apex's gas tenures

The Future Rationale for CSG and CMG Gas Production On the East Coast of Australia

Gas has been chosen as the transitional fuel of choice by the Australian Government in moving to a low carbon economy for generating electricity in Australia. This position and that of Apex Energy NL as a commercial entity is assisted by the "green debate", the Kyoto Protocol and any Carbon Pollution Reduction Scheme (CPRS) designed to reduce greenhouse gas emissions. On the East coast of Australia the traditional source of gas has come from the Central Queensland Basins and Bass Strait. This resource is in decline, and has been supplemented in recent times by CSG from previously unutilised coal basins and being transported to markets by a pipeline network.

Relevant Links

Future Gas Prices on the East Coast

Currently there is a dramatic price differential between the East and West Coast of Australia. The West Coast price is up-to 2.5 times greater than the current East Coast price as most of the West Coast output is converted into LNG and exported. Currently there are four proposals to build LNG gas trains in Gladstone Qld. Although the calorific value of the gas is less than the natural gas from the North West Shelf, this should dramatically increase the local gas price for both CSG and CMG producers once the LNG plants come on stream in the next 3 - 5 years. With CMG also being subsidised this makes APEX one of the only potential suppliers of commercial quantities of CMG to the market.

The chart below shows an estimate of gas price behaviour for the next few years and demonstrates the potential for investment in the coal mine gas and coal seam gas market.


Future Gas Usage on the East Coast

With the advent of the new LNG gas trains in Gladstone Qld, it is expected to increase the demand for gas produced on the East Coast. This together with the Government's wish to convert some of the current coal fired power stations to gas as well as the current expansion of the domestic household gas grid underpins the future for gas consumption on the East Coast.

APEX's Future on the East Coast

CSG production in NSW is in its infancy compared to Qld which is relatively well developed. The NSW market is currently the largest in Australia, which today sources most of its gas through two pipelines from Victoria and South Australia.

With Apex being able to produce gas in the Sydney basin this allows us to ship it either directly to the consumer, being a local power station or into the local Sydney gas grid. This provides Apex with a tremendous competitive advantage in the amount of revenue generated as a local producer.

Shipping it via a pipeline from NSW to Gladstone is an expensive exercise. Similarly shipping gas from Qld and Vic to NSW is expensive, which confirms APEX's geographic advantage in the Sydney Basin.

The charts below show the projected rise in energy requirement for NSW taking renewable energy into account.

 

 

 

 

 

 
 
 
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