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re: Ann: Quarterly Activities & Cashflow Repo... International focus on Cooper Basin shale


JOHN KEHOE

The huge shale potential of South Australia's Cooper Basin has captured the attention of international players, with North American firms including ExxonMobil scouring the region for an opportunity to get a foothold in the state, according to industry sources in Houston.

Talk among industry insiders at an energy conference last week in the US oil capital centred on the major potential of the Cooper. The interest is prompting international energy companies to stalk smaller local players as a potential entry point.

One senior US company executive said on the sidelines of the event that there was growing interest in the state.

Those of us who cut our teeth on unconventional gas in North America, we actually know what to look for, so we're looking around,� he said.

The Cooper Basin is Australias largest onshore oil and gas production region, although the unconventional shale and tight gas industry is in its very early stages.

Frances Total has also voiced interest in getting into the Cooper Basin, while British gas major BG Group and, more recently, US giant Chevron have taken up interests, in deals with Drillsearch Energy and Beach Energy, respectively. The geological basin in the north-east corner of South Australia and spilling over the Queensland border is fast growing an international reputation as one of the most attractive shale oil and gas locations in the world outside of North America.

Positive results from drilling in the basin, rising east coast gas prices and advances in hydraulic fracturing, or fracking, technology have made commercial returns from the acreage much more likely.

Houston-based Magnum Hunter Resources Corp in December became the largest shareholder in New ­Standard Energy, which has widened its shale interests in Australia from the Canning Basin in Western Australia to the Cooper Basin.

Other ventures are still wholly locally owned, such as Santos’s three-way joint venture in its 67 per cent-owned Moomba-194 operation with Beach Energy (20 per cent) and Origin Energy (13 per cent).

Australia ranks sixth in the world for technically recoverable shale resources, with a large portion accounted for in South Australia.

Limited capacity to develop acreage

Most of the incumbent oil and gas players in the Cooper, such as Senex Energy, Drillsearch and Beach, have sharemarket capitalisations below $2 billion, limiting their capacity to develop acreage to a commercial scale.

Only really Woodside has the size and capability to pursue these projects on a standalone basis,� Commonwealth Bank of Australia head of ­natural resources Grant Willis said.

Woodside Petroleum has no ­interests in the Cooper Basin.

Foreign investment is likely to be required as the projects mature, because of the substantive costs and expertise involved.

Industry estimates suggest $6 billion of investment is required to finance a 15-year export development project, including the cost of flow lines and wells.

Beach puts the cost of drilling a ­single well at between $8 million to $12 million.

Barry Goldstein, executive director at the South Australian Department for Manufacturing, Innovation, Trade, Resources and Energy, last week met with counterparts from the US Department of Energy in Washington to discuss foreign investment opportunities for US oil and gas firms.