BHP has its eye on Aussie shale

BHP set to join a host of international oil companies investing in Australia's shale oil and gas sector

Mike King

Mike King is a Fool.com.au Investment Analyst and Writer. He caught the investing bug more than a decade ago, at a time when the U.S. had invaded Iraq and fear reigned in the markets. His initial success as the markets took off encouraged his passion and thirst for knowledge. With 13 years behind him at one of Australia's largest domestic banks, Mike's passion for stocks led him to join a boutique funds management firm, where he stayed for four years. A seven-year stint in equity research at one of the largest investment banks in the world followed that, giving Mike a thirst to pursue his passion further. Mike holds a Diploma in Applied Finance and Investment and a Graduate Certificate in Financial Planning. His passion is to help retail investors invest better, and that passion was one of his primary reasons for joining The Motley Fool Australia in late 2011. Mike has written thousands of articles since joining, including for Fairfax Media, Yahoo!7, Ninemsn and has also appeared on ABC's The Business. You can see all of Mikes' holdings here

Published March 7, 2013 1:14 pm AEDT

The world's largest resources company, BHP Billiton (ASX: BHP) is set to join a host of local and international oil companies, digging for shale oil and gas in Australia.

According to The Australian, petroleum chief Mike Yeager said that the big miner was looking to broaden its footprint, after spending around US$20 billion buying up US shale operations in 2011.

Mr Yeager has recently suggested the Canning Basin in Western Australia had good prospects. At the same time though, he emphasised the problems Australia faces with a lack of infrastructure and distance compared to the US market, which has extensive pipelines and an established drilling and servicing sector.

Last week, US giant Chevron announced plans to spend around $340 million to gain a stake in Beach Energy's (ASX: BPT) Cooper Basin tenements. ConocoPhillips, Statoil, Total, BG Group and Hess have all previously moved into Australia's shale industry, mostly through farm-in agreements, where they agree to provide funding for drilling and exploration, for a part share of the project.

Buru Energy (ASX: BRU) has extensive landholdings in the Canning basin, and has already had some wins, with its Ungani 2 well producing 700 barrels of oil a day in a production test. Key Petroleum (ASX: KEY), and New Standard Energy (ASX: NSE), both junior explorers on the ASX, are also drilling in the Canning basin.

Australia's shale oil and gas industry is still in its infancy compared to the US and other regions. With the entry of several oil giants, exploration and drilling is likely to hot up, and it's one of the 'hot' sectors of the market.

Foolish takeaway

For every successful oil and gas explorer, there are probably at least another ten that never make it. An investment in this sector on an unknown and unproven junior explorer is a bit like buying a lottery ticket. If the company is successful, the share price will rocket, but investors have more chance of being disappointed.

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The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. Motley Fool writer/analyst Mike King owns shares in BHP.

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