Coal seam gas set to boom in 2015

By: Brad Lockyer

Presented by
  • Earthmovers & Exacavators

Coal seam gas extraction is set to become the largest growth industry in Australia in 2015, while the petroleum exploration industry is predicted to fall significantly, according to recent analysis from market research firm IBISWorld.

Coal seam gas set to boom in 2015
A coal seam gas well. Source: Australian Pacific LNG Project

The coal seam gas industry, which sees natural gas (primarily made up of methane) extracted from coal beds, has been forecast to receive a revenue increase of 148 percent to $1.83 billion over the next 12 months.

While improved extraction techniques have made coal seam gas projects more viable, the IBISWorld report notes that it is the development of export capabilities that is expected to drive the rapid growth.

"The opening of the domestic east coast gas market to the international market is expected to push gas prices higher – particularly as Australia is well-positioned to meet strong demand from Japan, China and South Korea, which are the world’s three largest natural gas importers," IBISWorld senior industry analyst David Whytcross says.

The phenomenal growth forecast comes at a time when coal seam gas extraction is still a controversial topic, with opposition groups claiming the practice damages local water tables and the environment, and at least one survey showing that affected communities have mixed feelings about the practice.

The exceptional growth predicted dwarfs that of the other industries expected to grow in 2015 with the online grocery sales, private equity and hydroponic crop farming industries predicted to receive 14.6 percent, 10.1 percent and 5.6 percent revenue increases respectively.

At the other end of the scale IBISWorld is predicting the petroleum exploration industry will be the hardest hit in 2015, with a projected 18.9 percent decline in industry revenue. Driving the downturn is the falling world price of crude oil due to overproduction from the US, Russia and the OPEC nations. The low price makes extraction projects less viable to Australian firms.

"High oil prices have acted as an incentive for global companies to invest in petroleum exploration over the past five years," Whytcross says. "However, the subsequent oversupply is going to hamper exploration in 2015, as Australian firms are unable to compete with the low production costs and high production volumes from the world’s major oil producers."

While the petroleum exploration industry is expected to post the biggest loss, IBISWorld is also predicting the mining and construction machinery manufacturing industry will take a revenue hit of 6.1 percent in 2015.

In recent years, the mining industry boom has led to investment in new mines and, subsequently, new mining and construction equipment. A global drop in price for commodities such as iron ore has deterred investment in new mining projects, leading to the projected downturn in revenue.

 

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