HOPES of tapping vast quantities of shale and tight gas in the Cooper Basin have taken a step forward with oil company Chevron committing up to $US349 million to an exploration joint venture with local players Beach Energy and Icon Energy.
Chevron is the first oil major to invest in an unconventional play in the Cooper Basin, which the US Energy Information Administration has estimated may contain 85 trillion cubic feet of recoverable shale gas.
Chevron is already the largest single investor in Australia's LNG boom with almost $US90 billion of construction under way at its Gorgon and Wheatstone projects in Western Australia, where it is struggling to contain costs.
The company has significant unconventional capability in the US - where it is active in the Marcellus, Utica and Wolfcamp shales - and is pushing into Europe and China.
News of Chevron's investment lifted shares in partners Beach (up 5.8 per cent to $1.37) and Icon (up 13.2 per cent to 22¢), as well as fellow Cooper Basin explorers Santos (up 3.2 per cent to $12.43), Senex (up 7.5 per cent to 65¢) and Drillsearch (up 4.3 per cent to $1.38).
Beach Energy will remain the operator, and managing director Reg Nelson said both parties recognised there was still much to learn in Cooper Basin exploration but it was "a great encouragement that a world class player like Chevron [has shown] confidence in the potential of this region".
Existing pipeline infrastructure can bring gas from the Cooper Basin to east coast domestic markets, and Mr Nelson said if there was enough gas it could also be sold for export, potentially supplying the three new LNG plants under construction at Gladstone, where there are fears of a shortfall in coal seam gas supplies.
On Friday, Santos revealed it had halved its estimate of the coal seam gas resources supplying its Gladstone LNG project.
In January, investors sold off Cooper Basin shale stocks after Beach, which will deliver its first-half profit result on Tuesday, reported a disappointing flow rate from its Moonta exploration well, in what Mr Nelson said this week was a "most undue market reaction".
Wilson HTM analyst John Young, who cautioned against the sell-off last month on the basis it was one of the first wells to be drilled in a larger program, said the Chevron deal was a "positive development". He said: "The east coast market is looking for more gas. We've seen companies like Rio Tinto say they need more gas. There is potential for further augmentation of [supply to] the CSG-LNG projects at Gladstone."
The deal covers two blocks over about 328,000 hectares in South Australia and Queensland.