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Australian Shale Gas: The Show, or All Show?

October 28, 2011

Need a natural resource?  Then Australia has it.

New fuel supply, notably unconventional in nature, is transforming world energy markets.  Shale gas in particular has attracted much attention:  for the scale of its potential, and for possible negative consequences associated with extraction processes.

There has been much press for several years about unconventional gas in Australia from coal seams, but only in the last twelve months or so has shale gas received press – and a rush of investment interest.

Australian listed companies active in Australia Shale Gas/Oil (source: Morgan Stanley):
Australian Listed                                  Ticker                    Mkt Cap. (A$mn – 06/2011)              Key Region
Adelaide Energy                                          ADE.AX                      51                                                                     Cooper
AWE                                                                  AWE.AX                     759                                                                  Perth
Baraka                                                              BKP.AX                      46                                                                     Georgina
Beach Energy                                                BPT.AX                      1,103                                                               Cooper
Buru Energy                                                  BRU.AX                     139                                                                   Canning
Drillsearch                                                     DLS.AX                      118                                                                    Cooper
Emerald                                                          EMR.AX                     35                                                                     Canning
Empire Oil                                                      EGO.AX                      107                                                                  Perth/Canning
Exoma                                                             EXE.AX                       65                                                                    Galilee
Icon Energy                                                  ICN.AX                       87                                                                    Cooper
New Standard                                               NSE.AX                      42                                                                    Canning
NorWest                                                         NEW.AX                     42                                                                     Perth
Oil Basins                                                       OBL.AX                         9                                                                     Canning
Origin Energy                                               ORG.AX                      17,233                                                          Cooper/Perth
Santos                                                              STO.AX                      12,547                                                           Cooper
Senex                                                               SXY.AX                      265                                                                 Cooper
Strike Energy                                                STX.AX                       56                                                                   Cooper
Transerv                                                         TSV.AX                      29                                                                    Perth

PLUS:

  • BHP Billiton (Mkt Cap: $204 Billion)
  • Westralian Gas & Power (Mkt Cap: $6.1m)
  • MEC Resources (Mkt Cap:  $22.6m)
  • BPH Energy (Mkt Cap: $7.3m)

There’s a veritable shale gas rush going on at the moment, with majors and many (sometimes very) juniors getting involved.

It’s a high risk environment.

Reservoir dynamics for the purposes of economic extraction for some of these reservoirs are largely unknown.  Distance and cost to market can be prohibitive.  Drilling is conventionally deep and technical (as opposed to shallow mineral rigs typically employed for coal seam gas extraction).  These areas don’t have the concentration of contractors and equipment to facilitate exploration and production across the zones.

Will this be a flash-in-the-pan fad for all but the majors for the foreseeable future?

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