US eyes Cooper Basin Shale Gas

US eyes Cooper Basin Shale Gas


Matt Chambers

The Australian, 11 November 2013


Central Australia’s shale gas potential is drawing growing international interest and could lead US energy giants to sharpen their focus on the country after presiding over an extraordinary gas boom in North America.


A leading energy investment bank in Houston, Texas, this week branded the Cooper Basin one of the best shale prospects outside North America.


Tudor Pickering Holt released its report following healthy initial flow rates from most hydraulically fractured, or fracked, wells in the Cooper, which crosses the South Australia-Queensland border.


And Tudor Pickering Holt lists strong gas prices and existing infrastructure as extra reasons for investors to sit up and take notice.


The eyes of potential international sharemarket investors and energy companies are now firmly fixed on planned horizontal drilling in the basin to see if the technology that turned a US gas shortage into a glut can be replicated here.


But the increased international attention to unconventional gas is sure to attract its fair share of controversy, as the anti-shale and coal-seam gas lobby, led in the media by top-rating Sydney based radio host Alan Jones, continues to drive strong opposition to development of new field.


“We see Australia’s Cooper Basin as one of the most likely near-term, commercial shale/tight gas developments outside of North America as it ticks most of the boxes for a successful unconventional gas development.” TPH said in a note to clients.


“The Cooper Basin has promising geology, with organic-rich mature shale, strong gas pricing, favourable fiscal terms, existing infrastructure in place, and already-present service industry, low population density, few environmental hurdles and generally industry-friendly government”.


The report which says Santos and Beach Energy are the best positioned companies to capture the growth, follows comments this week from leading energy academic Peter Hartley that early results had existed North American industry experts.


Professor Hartley, who splits his time as an energy economist between the University of Western Australian and Houston’s Rice University, said that at a recent Alaskan conference he had attended North American industry representatives had voiced surprise at how strong the results from Cooper Basin vertical wells had been.


“They are as good as the best of the North American vertical well.” Professor Hartley said.


The shale gas boom in the US is credited as having revolutionised world energy markets and set the country on a path to energy independence by the end of the decade, a situation unthinkable even five years ago.


US oil major Chevron shone an international light on Australia’s shale potential in February, when it announced a deal to spend up to $350 million exploring for shale gas with Beach.


Beach has said it plans to drill the Holdfast-2 horizontal well this month and reach peak flows in November.


BG Group has also entered the basin, where smaller local players Senex Energy. DrillSearch and Strike Energy (in conjunction with Orica) are also targeting unconventional gas. An expected tripling of east coast gas demand as $70 billion of LNG plants come online at Gladstone in the next three years is set to lift traditionally low eastern Australian gas prices to levels that may foster growth in the shale industry.


In what would be music to big gas consumers’ ears. “TPH said a key risk would be how the economics of shale gas compared with cola-seam gas in Queensland, and whether there was enough LNG capacity to support full-scale development, given limited local demand.


“This may be an issue similar to that seen in the US, where prolific productive capacity caused the gas price to crater.”


Continued strong gas flow from Australia’s first commercially producing shale gas well, the Moomba-I91 well operated by Santos, shows the potential for development, assuming the rate can be replicated at other wells.


“The initial 15 vertical wells targeting either shale or tight sand formations have shown promising initial production rates of 1 – 4 million cubic feet a day,” TPH said, nothing some 4 – 6 million cubic feet could be recovered and commercial at current drilling and completion costs.