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This Week in Energy: Analysts Pick Australia for Next Shale Boom

By James Stafford | Fri, 17 January 2014 16:31 | 0

While China, Russia and Argentina have topped the list of potential venues for the next shale boom, a new analytical report says all eyes should be on Australia as the most attractive venue for shale and tight oil and gas.

While huge reserves elsewhere have massive potential, Australia and the infrastructure and experience to make drilling in shale plays more attractive and easier to recoup costs, according to analysis released earlier this week by Lux Research.

The report notes that while Australia does not have the “seemingly bottomless development capital of China, or the powerful government incentives of Argentina”, it does have more characteristics “conducive to successful commercial production, which other front-runners like Argentina, China, the UK and Poland lack.”

“This includes existing infrastructure, low population density in key shale plays, and citizens who welcome resource extraction through its long mining legacy,” the report notes.

Certainly, investors are eyeing the massive projects going up in Australia to produce and export natural gas to Asia, where it will fetch high prices. Two massive LNG projects costing over $80 billion are being led in Australia by Chevron.

Australia will also be a key growth asset for BG Group, operates in more than 20 countries, exploring, producing and transporting gas, including tanker shipments of LNG. BG’s massive new Queensland QCLNG project is on track to start seeing gas flow by the end of this year. As of 1 November, BG had begun the commissioning phase for the first $20.4 million part of this project. The pipeline from the coal seam gas fields in Australia’s Surat-Bowen basins has all been laid and is now undergoing testing. Around 1,700 wells have been drilled in the gas fields.  

So, we’re inclined to agree with Lex Research, but that doesn’t mean China, Russia and Argentina are out of the game—nor should we underestimate the UK’s aggressive push to be in this race at all.

Argentina has massive shale reserves, but its political instability makes it less attractive. China is on a learning curve here; hence its foray into North American shale to pick up some pointers on how to develop at home.

For Russia, though, there is no real learning curve, and though the investment atmosphere isn’t as attractive as Australia, political will here to make this happen couldn’t be higher.

Just last week, Shell and Russia’s Gazprom Neft started drilling in what is believed to be Russia’s version of the Bakken Shale. The joint venture, Salym Petroleum Development (SPD), is drilling in the Bazhenov formation in Western Siberia—an area covering 2.3 million square kilometers (570 million acres). It’s the size of Texas and the Gulf of Mexico combined, so that makes it 80 times bigger than Bakken.

And while everyone’s waiting for the political dust to settle on chaotic Ukraine right now, and Poland has been disappointing, with too many withdrawals, the UK is forging ahead with its shale plans.

Last year, new studies were released estimating huge shale potential in the United Kingdom. Some estimates say the UK could have as much as 1,300 trillion cubic feet of shale gas under 11 counties in central and northern English. Since then, both Total and GDF Suez have struck up exploration deals.

We will be following the race for the next shale boom closely both through our regular coverage on Oilprice.com and more in-depth via the premium Oil & Energy Insider. Be sure not to miss this week’s installment of Oil & Energy Insider for a look at oil theft from pipelines in Mexico, our Energy Advisory focused on Southeast Asia and upcoming oil and gas auctions, plus the latest stock pick from Dan Dicker, and more.

Click here to start your 30 day free trial to Oil & Energy Insider.

James Stafford
Editor, Oilprice.com

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James Stafford
Company: Oilprice.com
Position: Editor

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