Is Beetaloo basin Australia’s answer to U.S. shale boom?

Drilling rig, Australia
Source: DollarPhotoClub

Australia’s remote and little known Beetaloo Basin in the Northern Territory (NT) is being tipped off as the country’s answer to the U.S. shale revolution.

Investors like Aubrey McClendon, founder of Chesapeake Energy and the head of American Energy Partners (AEP), and the private equity investor Energy & Minerals Group (EMG) are viewing the Beetaloo with growing interest.

The basin itself lies within the larger McArthur Basin, which holds at least 240 trillion cubic feet of potentially recoverable gas, more than Australia’s known conventional gas resources (Deloitte).

But it’s not only the rich resources that are beckoning the investors. The geographical location in proximity to famously gas-hungry Asia is an additional boon. Especially that the necessary infrastructure also seems to be largely in place. As The Sydney Morning Herald points out, the new $800 million North East Gas Interconnector, which will link the NT with Queensland, has expanded the market for the Beetaloo players to include the three huge LNG export projects in Gladstone as well as mines in Queensland and buyers on the east coast.

Then there is the $US37 billion Ichthys LNG project being built in Darwin and operated by the Japanese INPEX in partnership with Total, scheduled to start exporting LNG and condensate as early as 2017.

AEP and EMG are not the first companies to express interest in Beetaloo. ConocoPhillips and a U.S. independent operator Hess decided to abandon drilling in the Beetaloo basin in October 2014. Other companies, like Australian Falcon Oil & Gas, have found success in the basin, with results indicating the area drilled to be “a good prospect for multi-stage hydraulic fracturing” (Falcon).

Aubrey McClendon and AEP seem to be serious about Australian investments. In August, American Energy Partners disclosed that they are pursuing deals in the country with the combined value of over $160 million. In the same month, Australian Armour Energy announced that McClendon’s company signed a letter of intent and a three-month exclusivity agreement to acquire a 75 percent stake in 21.5 million acres of drilling rights in the McArthur Basin.

At the time, Armour’s executive chairman, Nicholas Mather, said that the deal “vindicates Armour’s view that the McArthur Basin represents one of the worlds great opportunities for the discovery of a new frontier oil and gas province”.

In November, in a presentation to investors in AEP’s new global arm, McClendon confirmed his commitment to exploration down under saying that Northern Territory is in its immediate focus as the U.S. shale sector was too “picked over” and “stuck-in-the-mud” of low gas prices.

NT Mines and Energy acting chief executive Ian Scrimgeour describes the Beetaloo sub-basin as “the most advanced and prospective shale gas play” in the region and says results to date have been “encouraging”.

“It is too early to form expectations on whether or not commercial gas will flow from the Beetaloo, however, there is increasing confidence that the gas in place within the entire sub-basin is in the order of hundreds of trillion cubic feet, and future work will need to focus on determining how much of that gas is commercially recoverable,” he said.

Australia is home to the world’s sixth-largest shale oil reserves and seventh-biggest tranche of shale gas, according to the U.S. Energy Information Administration (EIA). Sceptics, however, point to difficulties stemming from tricky geology, lack of water resources required for fracturing operations, the sector’s potentially high development costs, and the ready availability of coal-bed methane gas that is already in production, as reasons why the fate of Australia’s shale riches is far from being decided.

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