SURAT BASIN

Historically founded on rich, fertile farming land and extensive flood plains, the Surat Basin has significant reserves of Thermal Coal (used for creating electricity). From this, extensive commercially viable Coal Seam Gas deposits have recently been explored and now, began to efficiently be drilled and mined.

As we found in the Gladstone review it is clear that this level of mining activity in the LNG (liquefied Natural Gas) industry is unprecedented. In Australia, we have been drilling for gas for centuries and using it locally in, however this new wave of investment comes from record international prices being paid along with demand. This has made our Coal Seam Gas fields in Rural Queensland commercially viable to mine.

In the Surat Basin we find many regional centres:

1.       Roma

2.       Chinchilla

3.       Dalby

4.       Miles

5.       Wandoan

These are just a few notable towns when it comes to being positioned to potentially benefit from this mining activity. Situated around a number of Coal Seam Gas wells is Chinchilla. So far this year the Median sales price is $100,000 up from last year, this would be due to capital growth and a large amount of new home being built, however mainly due to capital growth. A major player in the CSG field development being GLNG project, they predict a peak workforce of 580 people for their well constructions which will be completed in 2014 where the workforce will drop to 200 for the same area. They also predict that due to skills shortages in areas like chinchilla and surrounds that the Fly in Fly out work force will be 90%. Now they may still choose to base themselves in residential properties however my view is once again that the construction workforce is significantly greater than the long term workforce which will cause massive inflationary pressures on the housing market, causing rents to go well along with capital growth, however I see a significant drop in these numbers once construction has finished. It is estimated to be approximately 90% reduction.

This is only one company out of the three CSG projects with financial decisions made, and one potentially very close, I think Chinchilla will go well in the coming years. A good 4 bed house and land package sits around $420,000. From my investigations, building with a few bathrooms (just like Gladstone) and furnishing is the way to go if you really want to maximise your return. My advice is to watch the market as I believe it is even more volatile than Gladstone was said to be (of which I have some news to update about later). Builders and marketing firms seem to be developing some of the estates and selling the house and lands themselves which is great, just make sure that street scape is developed & maintained if you choose to go down this track.

There are a lot of residential lots currently going through council to cater for this, it is expected that Chinchilla will see significantly higher levels of land available next year. However there is still a small level of coal mining activity in the area. Cameby downs mine, owned by Syntech resources have developed their first coal mine just north west of Chinchilla. First mass coal production for export is expected in 2013 once the Surat Basin Railway and the Wiggins Island Port expansion project in Gladstone are completed. It is expected that employees will rise from 100 to 600 for the expansion and long term contracts. Many of these people will reside in chinchilla.

Moving north is a small town of approximately 300 people called Wandoan. This to me is an area to watch over the coming 18 months as the Wandoan Group (an Xstrata company) are at an advanced stage of planning and hold significant deposits around the township. With potential output of approximately 20mtpa (million tonnes per annum). This once again will rely on the Surat Basin Railway construction as well as the Gladstone port expansion.

Most of the undeveloped land around Wandoan is crown land, with some parcel privately owned, I am told that land will be released next year maybe. In my enquiries to this town it seems almost impossible to get a builder, so any new build would have to be a transportable to be viable in my opinion. On that note, from a property investment point of view, if you purchased an older property you would need to furnish it (nothing fancy trust me!) to get approximately $200 per room. However, maintenance is going to be a real issue with this little town! None the less, I have identified this town similarly to Dysart in the northern end of the Bowen basin. An old 3 bedroom house will go for $330,000+. However do remember that Dysart has a more than just one mining company around it, whereas Wandoan will only have the 1 company. Quite a risk but the prospects I don’t think look to bad.

I haven't travelled to south to Roma as time restricts me at present and my focus is on the Bowen Basin region now.

Happy investing everyone!