A CSG rig at Kumbarilla , outside of Dalby. Picture: Mechielsen Lyndon Source: TheAustralian IT was the spark that investors exposed to Australia's coal-seam gas industry were waiting for. Speaking earlier this week, federal Industry Minister Ian Macfarlane made clear the Abbott government's intentions to boost CSG energy production when he said the removal of any impediments to further developing the sector in NSW was an urgent priority. His comments were enough to ignite the share prices of some smaller listed companies involved in the CSG sector, but investors in much larger industry players, such as Santos (STO) and Origin Energy (ORG), also stand to reap significant benefits. In just two trading sessions, the share price of NSW-based CSG company Metgasco (MEL) surged more than 30 per cent - its biggest increase in more than a year. The company was forced to suspend its operations in the NSW Northern Rivers region in March, blaming new regulations and administration procedures from the state government. Since then it has had to cut staff and focus on cost reductions, while pursuing opportunities outside the state. Its larger rival Dart Energy (DTE), which owns seven sites in NSW and has a market capitalisation of $122 million, also jumped close to 20 per cent over two trading sessions. Like Metgasco, Dart was pressed to focus outside of NSW. Earlier this month, the company undertook a $20.7m capital raising to reposition the company's strategy on its assets in Britain, retaining its assets in NSW on a "care and maintenance basis." "Current NSW government policy is such as to materially impact the near-term prospects for CSG development on much of the company's licence areas," Dart said in a statement. But the outlooks for both Metgasco and Dart have changed very quickly on the comments by Macfarlane that development of the natural gas industry was a priority, especially in NSW where, he said, it was vital that energy security was achieved by removing impediments to gas extraction. Australia's CSG industry is still largely in the development stages, with the bulk of exploration and production activity taking place in Queensland. At the forefront are Santos and Origin Energy, with Origin holding a 37.5 per cent stake in a $25 billion project near Gladstone to construct Australia's first CSG to LNG (liquefied natural gas) processing operation. The project also involves construction of a 530km CSG transmission pipeline from gasfields to the LNG facility on Curtis Island. Origin's partners in the project include US multinational ConocoPhillips (37.5 per cent) and China's Sinopec (25 per cent). Other small ASX-listed CSG players in Queensland include junior explorers Blue Energy (BUL) and Westside Corporation (WCL), which have multiple permitting licences for CSG exploration in Queensland's Bowen Basin. But the big stock that investors should be looking at is Santos, which has a significant CSG project at the Gunnedah Basin in NSW. In a recent investor presentation, Santos said it was on target to drill more than 200 CSG wells this year, at an average cost of $1.4m per development well. Santos's CSG acreage is the largest in NSW, covering more than 62,000sq km. The company's exploration leases take in the areas around Narrabri, Gunnedah, Boggabri, Coonabarabran, Quirindi and Scone. Over the next three years, Santos expects to invest about $500m on CSG exploration "to gather the vital scientific information that will underpin any future decision to progress towards development and production. Santos is committed to developing the region's CSG resources in a safe and environmentally sustainable manner and in co-existence with agriculture. At a recent industry conference, Diana Hoff, Santos vice-president, technical and engineering, said Santos was well positioned to develop its large unconventional resource base because of the increasing demand for gas both domestically and in the Asia-Pacific region. "In addition to demand, key factors to us developing these resources are the use of advanced technology and techniques, and increasing the efficiency of our operational processes," Hoff said. For this, Australia is looking to North America - we can learn a lot from the experience and expertise that exists there. Santos is seeing promising early signs in improving our operational efficiency, for example in our Cooper Basin and Queensland CSG fields. The benefits of greater efficiency extend to savings in time and cost and reduced environmental footprint. For a long time Santos has been the poor relation of the mighty Woodside Petroleum, but in recent months the Santos share price has run up strongly as the market becomes excited about its new gas projects. Since May Santos shares have put on more than 30 per cent, from about $11.40 to the current level above $15. Over the same timeframe, the share price of oil and gas rival Woodside has risen less than 20 per cent. Last month's profit statement for the half-year to June 30 from Santos provided a glimpse into how investors are looking forward to the new projects. Despite a 4 per cent fall in the volume of oil and gas production in the latest half-year, and an 11 per cent fall in underlying profit to $251m, the company's share price rose by 3.4 per cent on the day, and has continued rising ever since. Investors were mildly interested in the profit and welcomed the 15c-a-share interim dividend, but they were more interested in comments by Santos chief executive David Knox, who repeated previous suggestions that as cashflow starts at the PNG and Gladstone LNG projects shareholders could be in for a big payday. "These LNG projects are poised to deliver significant shareholder value and it is our intent to review capital management options as we approach PNG LNG production," Knox said. Those capital options could include higher dividends, share buybacks, or both. Tony Kaye is the editor of Eureka Report. To read more by Tony Kaye and other experts, go to www.eurekareport.com.au.