APART from its welcome reassertion that the $16bn Gladstone LNG project is running to timetable and budget, the Santos quarterly result is most notable for a reference to successful drilling of the Moomba 185 well.
It certainly isn't the first well drilled in Santos's empire of onshore tenements in the Cooper Basin, but it does represent something of a breakthrough. Moomba 185 acquired a shale core that "indicates results commensurate with US producing shale gas".
A couple of years back, when there was considerable, and quite reasonable, speculation about the sustainability of the Cooper Basin, Santos began telling anyone who would listen that "reports of the Cooper's death are greatly exaggerated". The future of Santos's foundation project, it was said, would be in "unconventional gas". That's the stuff that has to be forced from its hiding places, at least by driving water down the well, and perhaps by fracturing the seams of shale or coal that constrain or contain the targeted resources. And Santos has the gamut of unconventional options in the Copper, with shale and tight and deep coal gas potential.
It has so far booked 5000 petajoules of contingent unconventional resources and claims a resource potential across the basin of nearly 40,000PJ. To put that in context, Origin Energy has estimated it needed a 2P resource of 5000PJ to feed a 4.3 million tonne a year liquefied natural gas train over 20 years.
At present, the focus of Santos's drilling program is unlocking further conventional resources through infill drilling.
To that end it has commissioned three new rigs built to suit infill drilling, as well as investigate unconventional oil and gas shales. The rigs' performance is exceeding expectations, with quicker drill times and greater fuel efficiency and Santos is working on plans to drill its first dedicated shale gas well later this year using one of these new rigs.
This is interesting because the mood on unconventional resources has shifted 180 degrees over the past three or four years.
In Queensland, coal-seam methane is feeding LNG dreams that have so far brought final investment decisions on two projects worth a total of $30bn (Santos and BG Group) with one more likely to be confirmed by year's end (Origin Energy) and another on the drawing board (Shell).
Meanwhile, in the US, shale gas is the feedstock of an exploration and production boom replenished US gas reserves to Saudi-like levels and most recently BHP Billiton has paid better than $US16bn for a material slice of the US's next-gen energy source.
