Chevron puts spark into shale gas stocks
HOPES of tapping vast quantities of shale and tight gas in the Cooper Basin have improved with the oil company Chevron committing up to $US349 million ($339 million) to a joint venture exploration with two local players, Beach Energy and Icon Energy.
Chevron is the first big oil company to invest in an unconventional play in the Cooper Basin, which the US Energy Information Administration estimates may contain 2.5 trillion cubic metres of recoverable shale gas.
Chevron is already the largest single investor in Australia's LNG boom, with almost $US90 billion of construction work under way at its Gorgon and Wheatstone LNG projects in Western Australia, where it is struggling to contain costs.
Chevron 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.
Beach's shares rose by 5.8 per cent to $1.37 and Icon's by 13.2 per cent to 22¢ on the news of Chevron's investment. Other Cooper Basin explorers benefited too: Santos stock gained 3.2 per cent to $12.43; Senex 7.5 per cent to 65¢ and Drillsearch 4.3 per cent to $1.38.
Beach Energy will remain the operator. Its managing director, Reg Nelson, said both parties recognised there was still much to learn about exploration in the Cooper Basin but it was "a great encouragement that a world-class player like Chevron [has shown] confidence in the potential of this region".
Existing pipelines can transport gas from the Cooper Basin to domestic markets on the east coast. Mr Nelson said if there was enough gas, it could be exported, potentially supplying three new LNG plants under construction at Gladstone in Queensland, where there are fears of a shortfall in coal seam gas supplies. On Friday, Santos said it had halved its estimate of coal seam gas resources supplying its Gladstone LNG project.
In January, investors sold 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".
A Wilson HTM analyst, John Young, who advised against the sell-off on the basis that Moonta was one of the first wells to be drilled in a larger program, said the Chevron deal was a "positive development".
"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 spanning 810,000 acres, with Chevron acquiring up to 60 per cent of the permian section of PEL 218 in South Australia and up to 36 per cent of ATP 855 in Queensland.