from iress: dj newswire on shale gas, page-2

A most important development today - BG signing on to shale gas. Looking at the hole and not the donut - highly paid brokers and journalist (fed by brokers) are still talking about oz relatively low gas price, lack of nearby infrastructure and support and basically higher cost of extracting shale gas - witness the iress article.

BG in this deal today is buying insurance. Coal seam gas has real environmental concerns - particularly those relating to the unknown impact of massive amount of water being pumped out. If you were one of the three groups building an LNG plant at Gladstone a very smart move is to ensure that you are not going to be 100% dependent on coal seam gas supply to your plant.

The other two groups - Origin/Conoco and Santos/Petronas &co - have access to partners' CB conventional gas and perhaps also shale gas from less optimum areas. This is not ideal - conventional gas from CB is in decline and in the very short term producers may squeeze a bit more out through closer spaced drilling. Bear in mind that BPT has 20-23% of real estate in the SA and Queensland CBJVs - any move by Origin and Santos to increase massively shale gas drilling activity they will have to take care of BPT's share of the high costs involved - there are ways and means around it including of course the "takeover" route.

And here we have BPT - seriously undervalued - about to move to pilot stage and confirm a very significant shale gas resource - in many multiples of TCFs. Those other two groups and including BG will want to put their hands on it - even if it's just for insurance at this stage. Big companies have to think that way. BG's move today has already confirmed to me what the industry has in mind - and they would want to grab hold of BPT's shale gas before someone else does!

And on the NSE Canning Basin deal - Conoco/Karoon has the Poseidon/Kronos discovery in the Browse Basin of about 5 TCFs - enough for just 1 LNG train. A planned drilling program over about 2 years will look to firm up gas feed for at least 2 trains. The LNG plant will be at James Price Point - 200/400+ from the NSE Goldwyer project. NSE/Conoco shale gas will be feeding the LNG plant
+ possibly Telfer - that would be the long term plan.

IMHO the broking analysts have missed the big picture altogether - looking at the hole not the donut!
THINK ABOUT IT - in the space of just 2 weeks since Holfast 1 we have the Conoco/NSE and now BG/DLS deals.
If that is not HUGE I don't know what is.

BPT share price has a long way to go yet. I am not going to speculate on whether it is worth $2 or $3 or even $5 a share. There will be lots of news flow and farm-ins/acquisition activities yet to come.
Keep that in perspective.
The shale gas train is just leaving the station ........... All on board! Enjoy the ride!

As for the low domestic gas price - any offers for a $4/Gj bet in 2013? This is a story for another time.

Good Luck all ....... GB


I hold BPT, NSE, SEA