In attempting to export the shale oil and gas revolution to the Land Down Under, the industry will have to deal with a set of circumstances even more unique than the usual hurdles. Land access, equipment and manpower, infrastructure, fiscal terms and public opposition are just the tip of the iceberg in Australia.
Australia is unique. Anyone who’s ever watched Discovery’s Animal Planet knows that. This individuality is largely due to its isolation, as can be attested to by anyone who’s ever endured a 16-hour flight across the Pacific to get there.
And Australia is big. “How close were you to Steve Irwin’s (aka The Crocodile Hunter’s) zoo?” a friend asked upon my return from Perth (which is on the opposite side of the country from the famed zoo) in 2006. “As close as LA is to Chicago,” I guessed. I was wrong; it’s as close as LA is to New York.
A Land Set Apart
But, how different is Australia for oil and gas operators? Well, probably the first nut they will have to crack is its unique geology.
“We don’t understand lacustrine formations,” Jeff Meisenhelder, vice president of Schlumberger’s unconventional resources group, bluntly told a recent gathering of oil and gas professionals in Houston. He was one of two speakers at the Australian American Chamber of Commerce’s Fifth Annual Energy Conference to point out that North American shale production is from marine basins, while Australia’s sedimentary basins are terrestrial with source rocks primarily in coal and lacustrine shales. Meisenhelder was also not the only speaker at the event to note that even in North America there is a lot we don’t fully understand about shale oil and gas extraction.
Other factors discussed at the one-day event included Australia’s vast empty spaces, small and aging onshore rig fleet and lack of fracking services. And on a notoriously hot and dry continent, the universal issue of water is going to be even more taxing.
Nonetheless, there is “unprecedented interest” in the country’s shale gas potential, as Willem Westra van Holte, the Northern Territory Minister for Mines and Energy, noted. That interest is summed up in two words: potential and demand.
Two Sides of the Same Coin
Potential is fairly obvious. Australia has huge sedimentary basins, virtually all of which are “horribly unexplored,” as David Wrench, president of Strike Energy, put it. The country is very gas prone, as illustrated by its status as the world’s second leading exporter of LNG. Hundreds of billions of dollars are being spent in ongoing LNG development projects off the coasts of Western Australia and Northern Territory. Also, to a somewhat lesser extent, there is activity along Eastern Australia’s Queensland coast. Development has been spurred there by coal seam gas (known elsewhere in the world as coal bed methane) production in the Surat and Bowen basins. According to David Byers, chief executive of the Australian Petroleum Production and Exploration Association (APPEA), Australia has three LNG facilities in operation, seven under construction and more than a few under consideration. Sometime between 2020 and 2025, the country is expected to surpass first-place Qatar as the world’s top LNG exporter.
So what does this have to with shale? Well that takes us to the second part of the equation; demand. Apparently in Australia’s rush to find a market for its huge gas reserves, in a few years the country will be facing shortfalls not only in feeding the LNG developments, but also supplying its domestic market. With the EIA World Shale Gas Study estimating Australia has 396 Tcf of shale gas, several speakers noted shale gas is going to be essential for Australia’s LNG future.
Shale gas potential has been identified in a number of Australia’s basins, but as Meisenhelder noted, the bottom line remains whether operators can get it out of the ground. With its extensive thick coals, shale and tight sands, the Cooper Basin is currently Australia’s most active unconventional exploration region. However, the Canning and Perth basins in Western Australia and Beetaloo Basin in the Northern Territory are also deemed to have vast unconventional potential and are in the early stages of exploration.
Get the Word Out
So what does Australia need to do to promote its unconventional potential? Speakers agreed on several points, but the need to start collecting as much data as possible stood out. Hundreds of wells were drilled in the early shale days in the US, as exemplified by the 200 wells it took George Mitchell to figure out the Barnett Shale. Of course, Australia is going to have to get there faster, hoping to pick up and take off from where the US is today. That said, Australia cannot support the huge footprint shale development currently takes. “You won’t see it in Australia,” Meisenhelder said, “but then you won’t see it in the US in 10 years either.” Regarding the social contract, one speaker after another stressed that all concerns must be taken seriously and must be addressed.
“It’s a good thing we are getting started early,” Meisenhelder said, “because there are a lot of challenges.”
What about you? Are you an Australian operator working in America, or have you done any exploration Down Under? If so, what are your major lessons learned? What advice would you give to someone looking to enter the country? If you have strategically decided to stay away, what’s keeping you out? Please, leave your thoughts in the comments below.