Santos, Origin and Drillsearch to gain from NSW coal seam gas

The new Liberal government wants to open up New South Wales for more coal seam gas (CSG) development.

Delays and added layers of red tape as well as environmental pressure are will potentially cause a rise in gas prices when Queensland CSG delivery to export markets moves to full production. If NSW doesn’t have a sufficient amount of its own or alternative sources from other states, then QLD gas prices will control pricing.

Who benefits from having NSW open up its CSG development? Surely the biggest is Santos (ASX: STO), which has invested over $1 billion, but now with more regulatory controls and extra approvals processes,  it is now estimating that it may be 2017 or even 2018 before it can even start.

This uncertainty is also putting off potential investors into the project because they won’t help with funding if they can’t be assured of when it will actually start. The $2 billion Pillinga project is estimated to potentially supply one quarter of NSW’s gas demand once it is in full production.

Origin Energy (ASX: ORG) stands to benefit more because it already has extensive QLD development going on presently, and will be able to get the higher price from overseas markets regardless of the NSW situation. It doesn’t have any current developments in NSW, so if the regulatory burden isn’t lifted, it will be unaffected. If NSW is opened up, then it also has the opportunity of investing in projects to add to its supply and earnings.

Mining services companies like Drillsearch (ASX: DLS) can get in on the action if the federal and state governments open up the approvals logjam. It is already planning to work with Santos in Coopers Basin in SA for oil and gas drilling, so if Santos needs to drill hundreds of wells in the first stages of its NSW project, Drillsearch already has business connections.

Foolish takeaway

When making an investment decision, you want to consider which companies benefit, and which gain if the action doesn’t go through. In the case of Origin, it wins either way.

While the NSW CSG industry is sorting itself out, keep an eye on WA because apart from the offshore oil and gas industry, the state’s CSG potential hasn’t been tapped, and it may be easier to do business out there where the state government is more open to development and vast areas of uninhabited land makes business easier to do.

Think about your total return and find out about companies with good dividends. Discover The Motley Fool’s favourite income idea for 2013-2014 in our brand-new, FREE research report, including a full investment analysis! Simply click here for your FREE copy of “The Motley Fool’s Top Dividend Stock for 2013-2014.”

More reading

Motley Fool contributor Darryl Daté-Shappard does not own shares in any company mentioned. 

Top 3 ASX Blue Chips To Buy For 2019

For many, blue chip stocks mean stability, profitability and regular dividends, often fully franked…

But knowing which blue chips to buy, and when, can be fraught with danger.

The Motley Fool’s in-house analyst team has poured over thousands of hours worth of proprietary research to bring you the names of The Motley Fool’s Top 3 Blue Chip Stocks for 2019.

Each one pays a fully franked dividend. The names of these Top 3 ASX Blue Chips are included in a specially prepared FREE report. But you will have to hurry. Depending on demand – and how quickly the share prices of these companies moves – we may be forced to remove this report.

See the 3 blue chip stocks

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.