“As will be demonstrated, the coal seam boom which has gripped the Australian state of Queensland, and parts of North America, might turn out to be built on very weak foundations that include an assumption of strongly rising energy prices.

Today, the world is a totally different place to that of 18 months ago. With it has come a desperate search for “a new normal” and economic stability, particularly with energy supplies, and a return to conservative business assumptions. These included looking closely at how over-priced investment decisions made during boom years for oil can be justified in the new normal.

That puts the spotlight on coal seam LNG, a theoretical energy source based almost entirely on assuming that peak oil forecasts, and permanently high energy prices, were correct.

In Queensland, a series of ultra-ambitious asset purchases were made between 2005 and 2008 as some big oil companies, and private investors, plunged into the business of coal seam gas, a perfectly legitimate source of pipeline gas for domestic retailing.

The difference with those deals, such as the $8 billion paid by US oil major ConocoPhillips for a half-share of the coal seam assets of Origin Energy, is that they assumed a very different energy environment than today.

ConocoPhillips and Origin saw themselves spending up to $35 billion on a giant LNG project which would tap inland coalfields, pipe the gas to Gladstone, liquefy it by chilling, and then market the end product in Asia. That deal was one of at least eight based on the same boom-time assumptions, and which recently formed the basis of a Queensland government “framework” for future coal seam LNG production which would employ 18,000 people and rise quickly to an annual export target of 28 million tonnes of LNG.

Seasoned observers of the oil and gas industry never quite believed what they were seeing. No one in government, or the companies doing the deals, seemed to have considered the enormous engineering and environmental challenges that lay ahead.

That was probably because the key assumption was an ever-rising price for energy which would justify the initial high investment price, and pay for any contingencies along the way.

But, in early October public doubts started to surface as ConocoPhillips admitted it had overpaid in the boom and would have to sell $US10 billion worth of assets over the next two years to retire accumulated debt.

High on the list of things to sell, or investments to not be made, was Queensland coal seam LNG. No other projects have yet shown the same degree of “wobblies” as ConocoPhillips, but if the oil price stays around $US70 a barrel the bad news will soon spread.

No one is yet counting out the coal seam LNG industry, but the count has started, as it has on all unconventional oil and gas projects.”