An interesting development in the Australian gas saga today:
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 Cooper Basin has promising geology, with organic-rich mature shale, strong gas pricing, favourable fiscal terms, existing infrastructure in place, an 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 excited North American industry experts.
…”They are as good as the best of the North American vertical wells,” Professor Hartley said.
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 coal-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.”
This would be pretty funny if it came to pass. It would put the plans of the Gladstone gas majors in a spin, with their coal seam gas expansions at the expensive end of the cost curve in part owing to coal seam gas that is more expensive than these shale figures suggest. There is currently no pipeline from Copper to the QLD network (though there is one going the other way). Santos is a part of the Gladstone boom so it would surely seek to channel any cheap major new resource in the Cooper basin to Gladstone via a new pipeline.
But there are already pipelines from Cooper to NSW and SA. The cheap gas could be captured by the domestic market or even trigger new LNG plants in Newcastle that operate more cheaply than their QLD counterparts. Policy is going to determine the outcome so watch the rent-seekers swarm over this honey pot!
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
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