Shale gas basins excite explorers

Shale gas is the new energy on the block.

It’s a revolution that has turned the US energy markets upside down, from being a gas importer to a potential gas exporter in the space of a few short years.

Shale gas is starting to gather momentum on the Australian share market as well, and it’s not just the junior explorers involved.

Shale gas as the name suggests refers to gas locked within hard, deeply-buried shales.

Within Australia there are three noted shale gas basins: the Cooper Basin in South Australia, and closer to home the Perth Basin and Canning Basin in WA.

The shales that hold these gases are highly impervious, hence, to release the gas, the wells must be drilled and then the shales fractured horizontally.

This process, known as fracking, is relatively new to the industry in Australia with the technology developed and refined in the US before making a foray into Australia.

Shale gas first hit the mainstream headlines in Australia in February when BHP invested $5 billion in US energy company Chesapeakes’ shale gas assets.

Last week BHP stepped up to the plate again, this time purchasing US shale gas company Petrohawk Energy for $12.1 billion.

This means BHP has invested in the vicinity of $17 billion in shale gas assets in the US in the space of five months, so it must think it’s onto something.

But, interestingly, it has baulked at investing in shale gas in Australia.

On the local front, Beach Petroleum (BPT) and Adelaide Energy (ADE) are leading the way with their Cooper Basin acreage, and have just announced the results of their first flow tests which looked positive.

From here, the joint venture will be looking to book a gas resource and start pilot production wells.

Santos will be watching these results closely as they hold extensive tenement positions throughout the Cooper Basin and are set to be big winners if the BPT and ADE trials are successful.

In WA, the wheels are also turning with AWE, Norwest Energy (NWE) and Buru Energy (BRU) leading the charge.

Although it could be argued that New Standard Energy (NSE) has jumped all of these companies by last week announcing a deal that would see US energy giant ConocoPhillips potentially farm in to its Canning Basin shale gas assets.

I can’t finish this article without a word of warning.

The fracking process used to develop these shale gas assets does have environmental concerns, both with the chemicals used and the potential of free gas being released into the ground.

For those wishing to explore that side of the argument, the 2010 US documentary Gasland would be a place to start.

I’ll leave it up to the reader to make up their own mind.

For more information, contact Cameron Bartram at Sentinel Stockbroking on 9225 0028 or email cbartram@sentinelgroup.com.au

Information contained in this article does not consider your personal circumstances. You should consult a stockbroking professional before making any investment decisions. Sentinel may hold positions in stocks discussed from time to time.