Global

Details

  • Type: Business and industry issue
  • Date: 7/4/2013

Australia 

Australia Energy
A sleeping giant set to realize its potential

Opportunities

Australia is estimated to hold the world’s seventh-largest reserves of shale gas but the market is in its infancy, with its first shale gas1 well – operated by Santos – only coming online in October 2012. Shale is likely to play an important part in the domestic energy shift to gas, while export demand should be strong from the new and emerging South East Asian powerhouses.


Issues

Several factors contribute to high project costs. A shortage of essential skills has pushed up the price of labor, while the depth and relative isolation of most Australian shale deposits also increases drilling, utilities, transport and social infrastructure costs. Compliance is a further expense, due to complex and time- consuming state and federal requirements. Although financing is available, there remains some uncertainty over carbon and resources taxation.


M&A trends

Joint ventures between major national and international companies and smaller explorers include Norwegian giant Statoil’s phased investment with PetroFrontier, Mitsubishi’s partnership with Buru Energy, and ConocoPhillips’ collaboration with New Standard Energy. In February 2013 Chevron agreed to pay up to US$349 million for a stake in Beach Energy’s Cooper Basin interests, which is the single biggest acquisition in Australian shale2. PetroChina plans to purchase of 29 percent of the onshore Goldwyer shale formation in the Canning Basin from ConocoPhillips3 ; evidence of China’s desire to make gas a larger part of its energy mix.


Outlook

With vast reserves in remote, relatively unpopulated areas, Australia has the potential to become a major international shale gas player. Domestically, shale gas can replace conventional and coal seam gas being shipped offshore. And as an experienced net exporter of energy, Australia has a platform from which to increase LNG exports to existing and new buyers. A marked increase in activity over the past year by major, well-resourced, international entities suggests the push is under way.


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1Technically Recoverable Shale Oil and Shale Gas Resources: An Assessment of 137 Shale Formations in 41 Countries Outside the United States EIA/ARI Advanced Resources International, Energy Information Administration (EIA), 10 June 2013.

2Shale gas: tap into new wealth, AFR Smart Investor, 13 March 2013.

3ConocoPhillips to sell Australian gas assets to PetroChina, Reuters, 20 February 2013.

 

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