Energy explorers and producers located in Australia's Cooper Basin are preparing themselves for what has been described as a 'once in a generation opportunity' by oil producer Drillsearch (ASX: DLS) at the company's AGM last month.
Drillsearch, along with fellow Cooper Basin operators Senex Energy (ASX: SXY) and Santos (ASX: STO), are factoring in a significant increase in demand for natural gas from Australia's east coast states from 2017 as long-term supply contracts expire and gas is exported out of the country by Queensland's huge LNG projects.
Demand from New South Wales and Victoria in particular is seen as a significant growth opportunity, while un-contracted gas demand across all states is expected to more than triple between now and 2017.
Victoria is seen as having strong long-term demand after the state's ban on hydraulic fracturing (fracking) was extended out until June 2015, limiting the state's ability to develop new reserves.
The demand increase is expected to push up the price for domestic natural gas significantly, from current levels of around $3-$4 per gigajoule, to up to $10.
Senex Energy and Drillsearch are both currently undertaking extensive exploration drilling programs to uncover gas pockets for future supply, while Drillsearch has also teamed up with Santos on a joint venture worth up to $120 million to develop Western Cooper wet-gas.
Santos owns 66% of the existing Moomba gas processing plant in the Cooper Basin, which could serve as a key to processing some of the gas produced in the region. With existing pipelines running from the Cooper Basin to all three east coast states, the three companies could be in for a potential windfall if they make any material discoveries.
Foolish takeaway
Shares in both Drillsearch and Senex remain at attractive prices given their significant potential and outstanding exploration performance to date. With the strong growth forecast for natural gas demand in the coming years, discovery of a sizable gas deposit could send them soaring even further.
