By ROSS KELLY
SYDNEY -- Chevron said it will buy Australian shale gas assets
from Beach Energy for up to $349 million, placing a bold bet on
the potential to replicate the US boom in unconventional gas
output in the Outback.
Chevron is acquiring stakes in an area covering 810,000
acres -- equivalent to three times the size of Hong Kong --
that is largely untested for shale gas but near pipelines
connecting with several multibillion dollar gas-export facilities being built by rival
energy companies on the eastern coast.
The deal for up to 60% of Beach's interests in two blocks in
central Australia's Cooper Basin cements Chevron's status as
one of the biggest investors in natural gas down under. It is
already leading development of the Gorgon and Wheatstone
liquefied natural gas, or LNG, projects in Western Australia state
worth a combined $80 billion.
Global interest in shale gas is intensifying due to rapid
growth in production in the US, where the unconventional fuel
now accounts for more than a quarter of its natural gas
But industry executives caution that output could be slow to
take off elsewhere due to factors ranging from different
geology, a lack of infrastructure and concerns over technology used to get the gas
flowing from dense shale rock formations.
Shale gas is likely to be more expensive to produce than
conventional gas and coal seam gas in Australia, given the
shale rocks have to be smashed open with sand, chemicals and
water in a process known as "fracking".
Beach has drilled several wells exploring for shale gas in
permits in the Cooper Basin, and has reported encouraging
results. Competitors are also investing in exploring the area
-- Santos in August said shale gas from its Moomba-191 well
flowed at a commercially viable rate of 2.6 million standard
cubic feet per day.
Chevron, the second-biggest US oil company behind
ExxonMobil, is buying up to 60% of Beach's interest in two
blocks. Beach wholly owns one block and has a 60% stake in the
other where the remaining interest is held by small Australian
explorer Icon Energy.
"We believe that shale gas production from the Cooper Basin
will be required longer term to offset domestic supply
shortfall and possible supply to LNG trains, but there is still
a considerable amount of work required," says Stuart Baker, a
Sydney-based analyst at Morgan Stanley.
Beach has previously estimated that there could be more than
300 trillion cubic feet of gas beneath land it holds in central
Australia. That's roughly equivalent to ten times US gas
consumption in 2011, and dwarfs the 40 trillion cubic feet
contained in Australia's largest conventional natural gas field
-- Gorgon -- located offshore Western Australia state.
"We have an industry-leading queue of LNG projects under development in
Australia and this agreement provides an opportunity to explore
a new, prospective basin and potentially add to our natural gas
portfolio," Roy Krzywosinski, Chevron's Australian head, said
in a statement.
Dow Jones Newswires