Another major shake-up of Australia’s rapidly changing energy market can be expected if the BG Group succeeds with a takeover of Origin Energy, boosting the implementation and utility of coal seam methane LNG facilities.

There is increasing concern among European countries and Japan that with the Middle East dominating global oil and gas reserves, it is imperative to find other sources of supply. The BG Group, which grew out of the 1990’s privatisation of Britain’s government gas utility British Gas, has been aggressive in recent years in carving a niche in global energy markets as the supplier of merchant LNG cargoes to 14 of the 17 LNG exporting countries.

The big step into Australia by BG, which has a global market strategy, means a massive boost for a technology that is still commercially untried - vast export LNG processing facilities using coal seam methane.

Most private sector LNG projects, such as the North West Shelf development and Wickham Point in Darwin, are backed by long-term ‘take or pay’ contracts with customers. BG plays differently however, as a merchant. It does produce LNG in Egypt and Trinidad and Tobago, and buys supplies from third parties, but it sells into gas markets such as the US, where long-term LNG contracts are unknown.

Origin is Australia’s second-largest energy retailer after AGL, with nearly twice as many retail customers as BG Group worldwide, but it is Origin's coal-seam methane assets that are the attraction.

Until now, CSM has not been developed for LNG because the gas cannot supply the valuable liquids, such as LPG and condensates, that allow developers to offset the high capital costs of major LNG developments. Yet Origin has Australia’s biggest proven and probable reserves of CSM at 2570 petajoules, followed by Santos (1550PJ) and Queensland Gas Company (1317PJ).

BG Group bought a 9.9% equity stake in the latter in February and acquired a 20% interest in QGC's CSM permits, as it aggressively tackles the LNG market Down Under.

Queensland is now thought to have bigger estimated reserves of gas than offshore Western Australia. QGC and BG plan to develop a 380km gas pipeline from Chinchilla in Queensland’s Surat Basin to an $8bn CSM-fuelled LNG facility at Curtis Island at Gladstone, initially as a single processing train plant but with potential to expand to three trains. The first train would produce 3 million tonnes of LNG per year, while train three would take it past 10 million tonnes.