Although the assessed resource suggests there is huge potential for the shale gas industry in Australia, activity is still very much in its infancy. There have been very few exploration wells drilled, no appraisal programs conducted, and no commercial production.
The Australian industry has been led by domestic players. Companies such as Santos, Beach Energy, Drillsearch Energy, Senex and Icon Energy have been assessing shale potential in the Cooper Basin. AWE and Norwest Energy have been exploring the Perth Basin, while Buru Energy and New Standard Energy are active in the Canning Basin. Other basins have also seen activity, such as the Beetaloo Basin in the Northern Territory, the Eromanga Basin in Queensland, the Georgina Basin across the Northern Territory and Queensland, and the Amadeus Basin straddling the Northern Territory and Western Australia.
Despite only limited exploration, results have been promising. In July 2011, Beach Energy drilled its first shale gas well in the Cooper Basin producing up to 2 million standard cubic feet per day (mmscf/d), a result which was significantly greater than the company's expectations3. In early August 2011, Exoma Energy announced positive well results from its exploration activities in the Eromanga Basin.
The past 12 months, and in particular the past few weeks, have seen significant international interest emerge:
- June 2010: Mitsubishi committed to fund an AU$152.4 million exploration & development program, to earn a 50 per cent. interest in the majority of Buru’s exploration permits in the Canning Basin, with the additional right to acquire an interest in Buru’s production permits in exchange for an additional cash payment.
- September 2010: Bharat PetroResources agreed to acquire half of Norwest Energy’s interests in two permits in the Perth Basin, committing up to AU$15 million for exploration and drilling.
- December 2010: CNOOC executed a farmin agreement to acquire a 50% participating interest in Exoma’s coal seam gas and shale gas permits located in the central Queensland Galilee Basin by contributing $50 million towards exploration and appraisal expenditure during the farmin period, expiring on 31 August 2013.
- April 2011: Hess agreed a participation and evaluation deal with Falcon Oil and Gas in respect of the Beetalo Basin, pursuant to which Hess may acquire up to a 62.5 per cent. stake in three shale exploration permits and was granted warrants exercisable for 10 million common shares in the company.
- July 2011: ConocoPhillips entered into a non-binding heads of agreement and exclusive negotiation period with New Standard Energy to farm-in to a 75 per cent. share of the Goldwyer shale project in the Canning Basin, for US$109.5 million funding obligations and a payment in respect of sunk costs.
- July 2011: BG, through its wholly owned subsidiary QGC, agreed to acquire a 60 per cent. interest in one of Drillsearch’s tenements in the Cooper Basin plus an option for shares representing 9.9 per cent. of the company. In consideration, BG is to reimburse a share of sunk costs and commit to a five year $130 million three stage exploration and pilot production appraisal program (funding $90m of the first $100m). The venture also includes marketing provisions to sell gas for liquefaction through QGC's Queensland Curtis LNG project.
These transactions pale in comparison to the multi-billion dollar deals in Canada and the United States that have been making the global headlines. However, in many ways Australia is in a similar emerging position to where the North American shale industry was several years ago. As the resource in Australia becomes better defined and clear routes to market identified, then the transaction values could increase significantly