As international companies start chasing unconventional shale resources across the globe, they most likely have checklists in hand when picking desirable destinations: geological conditions, connection to markets, lead time to cash flow, and the ease of doing business with the government.
“Australia is within the league of high prospects,” said Barry Goldstein, executive director for the energy resources division of South Australia’s Department for Manufacturing, Innovation, Trade, Resources, and Energy’s. Six basins in the country are believed to hold a combined 13 Tcm (437 Tcf) of technically recoverable shale gas and 17.5 Bbbl of shale oil based on estimates from the US Energy Information Administration (EIA).
He called the Cooper basin – comparable in size to the Barnett shale – the “lowest hanging fruit” for unconventionals in Australia and pointed out areas believed to be rich in liquids.
Speaking Nov. 7 during the World Shale Oil and Gas Summit in Houston, Goldstein highlighted attributes of the Cooper basin’s composite resources of tight sands, siltstones, shales, and deep coals. Initial unconventional resource estimates for the basin are high: company 2C contingent unconventional gas resources of approximately 142 Bcm (5 Tcf); an EIA estimated basin potential of 3 Tcm (85 Tcf) of sales gas in shales; and a rough estimate of sales gas in the composite play of around 5 Tcm (175 Tcf).
“You already have pipelines. You already have gas lines. You’ve already got majors. You’ve already got 1,800 wells drilled. A lot of those are oil wells that have only gotten to the Jurassic, the deepest target, to produce oil,” Goldstein said.
Add this to the country’s shallow coalbed proved and probable reserves of about 1 Tcm (43 Tcf) and the country’s domestic demand for gas being only 28 Bcm (1 Tcf) per year, and the overall potential is plenty to pique investors’ interest. “If we don’t export it, it’s going to stay in the ground,” he said.
But shale development is not without its challenges.
“There is no rail into the basin yet. There is not even a paved road coming from the south,” Goldstein said, referring to the Cooper. He later added that “with gas being developed all around the world from this unconventional gas revolution eventually it’s going to put a ceiling on price. It’s still going to have to make enough money to get it out of the ground.”
Goldstein didn’t specifically mention the high costs of drilling wells in Australia.
The costs for a fully fracture-stimulated vertical well drilled between 2,000 m and 3,000 m (6,562 ft and 9,843 ft) costs about US $10 million, Senex Energy CEO Ian Davies said in the April 2013 edition of E&P. Horizontal fraced wells cost even more – running between $15 million and $20 million. Add to that labor costs that climb to $100,000 a day.
“Clearly we have challenges,” said Brad Lingo, a summit panelist and managing director for Drillsearch Ltd., which is active on the Cooper shale scene. “One of them is community reception and response. We are remote, and therefore there are logistical challenges. We know that technology is the game changer, but do we have access and cost to [execute it] in a timely manner.”
Water availability also is a challenge for Drillsearch, which operates in the desert.
But despite the obstacles, interest remains high in the Cooper basin. Among the key factors, according to Lingo, is the explosion of export capacity currently being built. Three independent projects under way alone will result in 24 million tons per annum of export capacity upon completion. “That [export capacity] is easily capable of expansion for an exploding, hungry market and not a market that is paying low prices for gas. It’s paying high prices for gas.”
Lingo added that “as the only independent in the Cooper basin that has been able to make a gas discovery, get it developed, and get it commercialized through the existing Santos-operated infrastructure, with three current long-term contracts on foot, there are wellhead netbacks for raw and processed gas that far exceed gas prices. So we are not dealing with a market environment that is chiseling the producer if he doesn’t have liquids. This is a good representation of what the existing domestic market is and how that export market is growing.”
Australian unconventional resources have become the focus of the majors, and the international oil companies are clearly focused on establishing their positions, particularly in the Cooper basin shale plays, Lingo said, noting Beach Energy, Drillsearch, and Santos are driving the search. “The entire Permian sector is prospective. That is upwards of 1,600 m[5,249 ft] of prospective section both at REM sequence and deeper Patchawarra formation.”
Lingo pointed out several key Australian unconventional farm-in deals that have taken place since 2011. Among the high-dollar deals was a $349 million agreement between Chevron and Beach for acreage in the Cooper basin.
Meanwhile, Drillsearch, and joint venture partner QGC, continues its four-well unconventional drilling program in the Cooper basin. The second well, Padme-1, was spudded Oct. 25, according to the company’s latest drilling and operations report.
Contact the author, Velda Addison, at email@example.com.
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