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Shale oil industry to develop at a `moderate pace' in Australia

by:Barry Fitzgerald
From:The Australian
June 12, 201312:00AM


THE shale oil and gas revolution that has transformed global energy markets is on its way to Australia. But according to the US Department of Energy, the industry is only likely to develop at a "moderate pace" in Australia because the nation's shale oil and gas resources are far away from the sort of infrastructure that has underpinned the US production boom.

The prediction of moderate growth came with fresh estimates that six basins in Australia stretching from coastal Queensland to Western Australia's far northwest contain recoverable shale resources of as much as 17.5 billion barrels of oil and 437 trillion cubic feet of gas -- all of which was previously inaccessible because it is contained in shale formations.

Advances in horizontal drilling and hydraulic fracturing techniques have made such resources accessible in the US, transforming the energy scene in the world's biggest consumer of carbon fuels and raising the prospect that the same technologies can be applied to shale formations elsewhere in the world, including Australia.

"With geologic and industry conditions resembling those of the US and Canada, Australia has the potential to be one of the next countries with commercially viable shale gas and shale oil production," the DoE's Energy Information Administration says in its report on the potential scale of global shale resources.

"Small independents have led the way (Beach Petroleum, Drillsearch and others), assembling the geological data and exploring the high-potential shale basins of Australia. International majors (Chevron, BG and others) are now entering these plays by forming joint-venture partnerships with these smaller independents, bringing capital investment to the table. But, with the remoteness of many of Australia's shale gas and shale oil basins, development will likely proceed at a moderate pace.".

In the US production from shale sources has boomed, raising the prospect that it will overtake Saudi Arabia to become the world's biggest oil producer by 2020, changing geopolitical dynamics in the Middle East and elsewhere.

Lower-cost gas is also being banked on to underpin a renaissance of industrial America while substantially lowering US carbon emissions, without the need for a carbon tax, because of a quick uptake by previously coal-fired power stations.

The rapid growth of the US industry -- it now accounts for 29 per cent of total US oil production and 40 per cent of gas -- has been aided by generous royalty payments to landowners helping to negate community suspicion and concerns about fracking practices.

The payments of up to 20 per cent of the value of the production have eased the way for the industry to access prospective acreage. That is in contrast to the Australian industry, where any royalties are the preserve of government. Industry here argues that the debate on fracking has been hijacked by green groups, particularly in the eastern states.

Of the six basins studied by the EIA, the Cooper Basin in central Australia, with its existing gas processing facilities and transportation infrastructure, was said to have the potential be the first commercial source of shale hydrocarbons, although elevated carbon dioxide content could be a limiting factor