Based on recent posts like "Will the UK Face a Natural Gas Shortage this Winter?" and "ASPO comments regarding Spain", it looks like Europe will be looking for additional sources of LNG supplies in the next few years. The question is whether there will be sufficient supply available.

One source of supply that may not have been considered is LNG from Australia. Australia has begun developing its unconventional natural gas production, and may in fact be able to ramp up its exports in the next few years — if not to Europe, to other countries in need, freeing up LNG exports from elsewhere for Europe.

There had been persistent concerns that the east coast of Australia would suffer a shortfall of gas supplies as the Cooper Basin and Bass Strait natural gas fields declined, with the possibility of constructing a pipeline from Papua New Guinea to meet demand being considered. These fears have subsided in recent years as large quantities of coal seam gas (CSG) have been discovered. The new gas production has not only proved sufficient to offset declines elsewhere, but quantities are large enough to result in a rush to export surplus gas in the form of LNG.

In recent months we've seen a surge in the stock market valuations of coal seam gas producers, triggered by a bid by BG for Origin Energy - one of the major players in the sector - a few months ago. The bid eventually failed, with Origin instead choosing to partner with Conoco Phillips in a CSG to LNG development, with Conoco paying $US9.6 billion ($12 billion) for a half-share of Origin Energy's CSG assets.

BG's interest was triggered by a desire to locate new sources of gas for their LNG export markets, particularly in Singapore - and they are just one of a number of players interested in turning Australian CSG into LNG and exporting it to markets in Asia and elsewhere.

In this post I'll look at recent events in the industry and what they mean for Australian gas production in future.