Addressing the AustralAsian Oil and Gas Conference in Perth yesterday, John Fleming – chief inspector of the Queensland Government’s petroleum and gas unit – said several companies were already exploring this option in the state.

“No doubt the reserves are there, and it would be relatively easy to establish a plant in that you put the gas in and get the LNG out – but what are you going to do with it?” Fleming said in response to questioning from the audience.

“These CSM fields are a long way from the sea – so that rules out an export market.”

Despite the scepticism, Fleming did concede that there could be a domestic market for LNG – such as regional power plants and heavy trucks.

“I’d envisage that it would be used for heavy industry located away from the mains,” he said.

“But it’s a huge deal to set-up a new industry like that. In the case of the transport industry, big questions need answering, such as how many fuel stations do you need along the way.”

Back in August, CSM mid-cap Arrow Energy revealed it was looking at downstream gas opportunities.

“Those products could be anything from compressed natural gas, small-scale LNG or gas-to-liquids,” chief executive Nick Davies said at the time.

Since then, the company has started carrying out a GTL feasibility study in partnership with alumina producer Alcan South Pacific.

LNG is already being used as a transport fuel in Europe and the United States, and a recently completed six-year Federal Government-funded study into the use of natural gas for heavy vehicles found that it was also a viable fuel for Australia.

In Western Australia, diversified corporation Wesfarmers began building a 175-tonne per day LNG plant in Kwinana, which will produce fuel for heavy trucks and regional power generation.

The $138 million LNG plant is due to be commissioned in the first quarter of 2008, and Wesfarmers estimates the facility will produce about 64,000t of fuel per year.

Natural gas is available in two forms for transport – LNG and compressed natural gas (CNG). One cubic metre of CNG offers the same energy output as a litre of diesel, while 1.62 litres of LNG offer the same energy output as diesel.

While these natural gas fuels are not as energy-efficient as diesel, they do offer other benefits, according to their advocates, including environmental benefits, economic savings for users and macro-economic benefits for Australia, a country that imports oil but has enormous gas reserves.

Whether or not CSM is viable as feedstock for a gas-to-liquids industry, Fleming believes strongly in that the sector will prosper.

"To say coal seam gas has a bright future is like saying the Antarctic is a bit chilly," he said.