Santos ready for coal seam gas fight

Gas giant Santos has escalated its war against environmental groups opposing coal seam gas exploration, accusing them of hijacking the debate and exacerbating the looming energy supply "crisis" in NSW.

Chief executive David Knox said the Greens and other environmental groups in Australia were originally supportive of gas as a transitional fuel to wean the country's energy grid off coal and eventually on to renewable sources.

But now they had turned against the industry, he said, because the success of gas exploration - particularly in the US - now meant it would become part of the long-term energy mix. "This is a concerted campaign to shut this industry down," he said.

"When we all started this journey, gas here in Australia was viewed as a transition fuel. And I think what has happened, interestingly and I have to say incredibly disappointingly, the Greens are now opposing gas."

NSW Resources and Energy Minister Chris Hartcher said the level of intensity in the coal seam gas debate was unlike anything he had seen, and blamed the industry in part for failing to initially engage with communities and explain the process.

"That vacuum has very quickly been filled by extremist Greens, fortified by a level of ignorance in the community," Mr Hartcher said.

One of the Greens' policies for the election is to ban all new CSG exploration, a move federal Resources Minister Gary Gray this week branded as "absurd".

Mr Hartcher said the immense community backlash on coal seam gas, exacerbated by the distrust in government brought on it by the ICAC proceedings in NSW, meant the O'Farrell government would find it difficult to loosen its toughened regulatory CSG regime.

The technique used to extract coal seam gas, known as fracking, involves a mixture of water and chemicals pumped deep into oil or gas-bearing rock to cause fractures and release the hydrocarbons. Environmentalists say the method poses serious threats that include contaminating groundwater and triggering earthquakes. Santos is using the annual oil and gas industry conference in Brisbane this week to win "the hearts and minds" in the community for its plans to mine coal seam gas in the Pilliga Forest in NSW.

More than 60 per cent of all homes in Australia are connected to gas, including 1.1 million homes in NSW, which imports 95 per cent of its natural gas, more than 30 per cent of it from coal seam gas piped in from Queensland.

Industry executives have been highlighting the potential for consumer gas prices to soar by more than one-third because contracted gas supplies start to run out in 2016.

"I see things in the paper saying the industry's creating this supply issue in the eastern seaboard ... that's complete nonsense," the head of Santos' eastern Australian operations, James Baulderstone, said. "There's an issue that needs to be dealt with. We are creating a supply crunch when we were one of the luckiest countries in the world as far as energy goes."

Federal opposition energy spokesman Ian Macfarlane told the conference: "Gas is either going to get so expensive that some will stop using it or there won't be enough around or the price will not be economical.

"They must get this gas developed in the Pilliga, they must have the political courage to build the pipeline and get it into the network."

■Global energy giant Chevron says it is in "active discussions" with customers to increase the amount of LNG sold from its Gorgon mega-project under long-term contracts from 65 to 85 per cent.

"The closer we get to our first LNG the more valuable the volumes are going to be," the company's Australian managing director, Roy Krzywosinski, said.

Chevron, the second largest American oil company behind ExxonMobil, says it will produce its first gas early in 2015.