Wall Street Journal: Australian Coal-Seam Gas Projects Blow Past Budgets

ConocoPhillips, Total SA and other global energy companies have invested US$60 billion on bets they could pump natural gas from Australian coal seams and create a new frontier in a world hungry for clean-burning fuel.

But problems perfecting new drilling techniques, conflicts with landowners and competition from the U.S. shale revolution are threatening returns from those six years of investments.

Australia is the first country seeking to convert methane trapped in coal seams into liquefied natural gas, which then could be exported on tanker ships. The country has a vibrant LNG industry and is on track to overtake Qatar as the biggest exporter of the fuel by 2017. Most projects, however, are for conventional natural-gas deposits in deep waters off Australia's northwestern coast. The country's unconventional coal-seam projects, meanwhile, are being closely watched by countries from Britain to Indonesia, which hope to make better use of their own seams.

The first Australian project, owned by Britain's BG Group PLC and expected to go online this year, underscores the challenges that have helped quiet the buzz over coal-seam gas. The project, in this eastern port city, is 36% over budget, at US$20.4 billion, hurt by such factors as rising labor costs and unfavorable currency swings. MORE