US has its eye on Aussie shale gas

Cooper Basin ranked as one of the best prospects outside North America

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 October 11, 2013 12:00 pm AEDT

Australia's shale gas basins have attracted the interest of the US, with one investment bank rating the Cooper Basin one of the best shale gas prospects outside North America.

According to The Australian, Tudor Pickering Holt (TPH), an energy investment bank located in Houston, Texas, says the Cooper Basin, which crosses the South Australia into Queensland, is one of the most likely near-term commercial shale/tight gas developments outside of North America as it ticks most of the boxes for a successful unconventional gas development.

The bank cites strong gas prices and existing infrastructure, as well as healthy flow rates from most hydraulically fractured wells in the Cooper Basin. "The Cooper Basin has promising geology, with organic-rich mature shale, strong gas pricing, favourable fiscal terms, existing infrastructure in place, an already-present service industry, low population density, few environmental hurdles and generally industry-friendly government," TPH reports in a note to clients.

TPH notes that Santos (ASX: STO) and Beach Energy (ASX: BPT) are the best positioned companies to capture the growth. Drillsearch (ASX: DLS) and Origin Energy (ASX: ORG) have also been active in the Basin, in joint ventures with both Santos and Beach.

Leading energy economist Professor Peter Hartley, is reported as saying the Cooper Basin wells are as good as the best in North America. Shale gas has revolutionised the US energy market, setting the country on a path to become self-sufficient within a decade, something unheard of as recently as five years ago. Australia's shale gas industry is some years behind North America, but there's every reason to believe that our shale gas production in the future will be multiples of existing levels. That's partly the reason that three LNG processing plants are being built in Gladstone, Queensland alone.

Foolish takeaway

The Cooper Basin is not Australia's only prospective conventional and unconventional oil and gas region, and several of Australia's smaller oil and gas explorers could be sitting on virtual gold mines. Of course, the challenge for them is raising the capital to develop those resources, which will require billions of dollars of capital.

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Motley Fool writer/analyst Mike King owns shares in Santos.

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