another good day ahead..??, page-17

Gday tui,
Well this is th way I see the gas glut situation. Dominated by the following three factors:

1. Location

2. Margins

3. Timing


Location
If we can draw gas from anywhere in the world using 'unlimited' technlogy to do so, there is certainly more gas than we could ever wish for.

However, it needs to get to a market. So even though Beach may have swillions of gas, it still needs to find a market. Most of the gas for the LNG plants in Gladstone is stitched up.

The other aspect of location is the location of the field. Now we know that the Cooper up starts have recently cottoned on to this idea as we have today seen that they are highlighting the 'no agricultural overlay' aspect of the cooper. This does add cost in both directions though, so you have to be careful for what you wish for here.

Margins
So the next factor is margins. If we are connected with no limits, then the limiting factor is the size of the demand, which then sets price.

We want to be in a high-margin business. And in a world awash with gas .....liquids is the place to be. Hence my excitement over the prospect that STX,OGY and SXY could be sitting on a liquids gold mine.

I recommend to anyone reading this, to go back and have a look at MAP 2 from todays announcement. It clearly shows Marsden-1 in the Battunga trough - and of note are the big swirling green blobs around the trough - these represent oil fields - LIQUIDS!!!!

Every oil field has a source kitchen/graben that feeds the oil into the trap where it is eventually drilled; these fields have come from the trough which we are about to drill in Marsden-1.

Timing
The timing of the field discovery has a substantial factor in the developemnt and connection of the gas fields to their markets.

Consider the Cooper basin - remote field, existing and underutilised transmission capacity. Ready to go but market limited for the volume of gas in the cooper tht is likley to be produced.

Consider China/Japan CSG-LNG - Surat and Bowen fields transmitted by multi-billion dollar facilities to markets that hold 20 year contracts.

A lot can happen in 20 years to gas. The trent is up for gas usage around the world (cleaner burning) but at what point will it be saturated around the world into a glut?

So back to my first notion of having unlimited technology to spread around the world. The technology will spread around the world - I personally am substantially invested in four Aussie companies drilling substantial unconventional fields in:
1. Europe
2. China
3. India
4. USA

That looks like the world to me. And it is a serious matter of getting the timing right for all of these to make sure I am not sitting in a price glut at the wrong time.

For evidence that this can happen - see the story I posted about CHK from Oklahoma the other day and how they are suffering under a burdenous debt with low gas prices - thats a glut!!!


And my final thing to through out there - I strongly believe that BHP aren't twats. They already have substantial LNG experience and I firmly believer they will press with an LNG export terminal. they will be fracced without it.


When we say shale now, what we really want to hear is shale condensate/oil, not necessarily gas :)


Go Strike!


SF