ambassador firms up cooper basin unconventiona, page-6

Santos keen on Cooper Basin.

Article from todays afr:

Edited by Sarah Thompson and Anthony Macdonald

With plenty of grim news around on liquefied natural gas construction costs, Santos’s positive story to the market on its promising shale gas operations in the Cooper Basin is well timed.

The briefing of about 30 analysts and investors at the Citigroup offices in Sydney on Monday neatly diverted at least some of their attention away from the ugly $US3.3 billion cost blowout at the Papua New Guinea LNG venture in which Santos has a stake.

The timing also fits well with the latest bullish forecasts from the International Energy Agency in Paris for shale gas production, and with BHP Billiton’s upbeat briefings to journalists in Houston late last week on its shale operations in Texas.

Santos estimates its prospective unconventional gas resources in the Cooper Basin at anywhere between 15 trillion and 125 trillion cubic feet, offering a huge prize to go after.

Rising east coast gas prices and a drop-off in contracted supplies at the same time as a huge demand surge on the back of the Gladstone LNG projects means the demand side also looks good.

Analysts coming from the briefing pointed to a planned $200 million investment in unconventional gas that Santos is hopeful of getting its Cooper Basin partners to sign off on shortly. The spending would go on trials of drilling and well completion technologies over the next two years targeting Moomba’s so-called REM shales and the Nappamerri Trough.

Partner Beach Energy is seen as a willing participant, although some doubt fellow venturer Origin Energy will be as keen given its hefty commitment with the Australia Pacific LNG venture and other pressing concerns.

Santos’s update on its Moomba 191 well, Australia’s first commercial shale gas production, was well received but has got a few heads scratching.

Production has held up surprisingly well, starting at more than 3 million cubic feet a day and still running at about 2.5 million cubic feet a day six weeks later. The absence of a steeper decline – typical of shale gas wells – has sparked speculation that gas may be coming from other shales aside from the Murteree shale as planned.

Santos’s infrastructure advantage in the Cooper Basin, with easy access to pipelines and processing, hasn’t gone unnoticed. The handy connection from Moomba to the GLNG project in Gladstone is another plus.

Capex for shale in Australia remains a concern but Santos has suggested future vertical shale wells could break even at just $6 a gigajoule, not far off present prices. Investors will learn more at Santos’s investor briefing in Sydney next Thursday.