CSG, Markets, Projects, Technology

New frontiers in gas exploration – Beach goes after shale

Cooper Basin asset acquisition

In the past few years a massive land grab has taken place in Queensland by international companies such as BG Group, Shell, and ConocoPhillips to capture prospective CSG acreage that promises large volumes of gas to feed LNG export projects.

Like CSG, shale gas is also described as an “˜unconventional’ gas, and has not been the focus of large upstream producers whilst they have been developing traditional conventional gas reservoirs – until now.

Beach Energy Commercial and Corporate Development Manager Steve Masters says “The shale gas potential of Australia, and in particular the Cooper Basin, in terms of potential resource volumes is enormous. While the commercialisation path for this gas won’t happen overnight, the regional strategic importance of such a large potential long-term resource cannot be underestimated.”?

A small number of mid- and small-cap companies, including Beach Energy, Adelaide Energy, Icon Energy, AWE, and New Standard Energy, are seeking to demonstrate that shale gas can be economically viable.

What is shale gas?

Shale is a fine grained sedimentary rock composed of clay minerals and other minerals such as quartz and calcite. Historically, shale has been considered to be a sealing unit that prevents gas and oil from migrating out of conventional accumulations due to its very low porosity and almost absent permeability (usually one nanodarcy or lower).

However, due to the organic content in shale – typically 1-5 per cent – gas is generated and stored within the rock. When combined with a thick shale section and over pressured conditions, this rock may yield favourable conditions for a shale gas project.

Shale drilling techniques

Due to the inherent low permeability (productivity) of shale, gas production is stimulated by drilling long horizontal wells and placing extensive multi-stage hydraulic fracture treatments.

While horizontal drilling and fracture stimulation are not new technologies, recent advances – particularly in multi-stage fracture completion technology – have greatly improved production, reserves and economics. Successful wells in the United States have yielded initial rates of 10-30 million cubic feet per day of gas.

Areas for production

In geological terms, a number of Australian basins hold prospective areas for shale gas, including the Cooper Basin, Perth Basin, Canning Basin and Beetaloo Basin.

Mr Masters suggests that the area with the greatest potential is probably the Nappamerri Trough, located within the Cooper Basin. The Nappamerri Trough has geological properties similar to that of the best shale gas plays in the United States, plus the benefit of proximity to infrastructure that feeds eastern Australian gas markets.

Mr Masters says that it is difficult to predict just how much shale gas there might be in Australian basins, since exploration that specifically targets shale gas is in its early days. Estimates of gas-in-place are very large due to the abundance of shale, but the recoverable gas is yet to be determined.

The best model is the more established shale gas market in the United States. In April 2009, the US Department of Energy reported estimates of recoverable shale gas resources of 550 trillion cubic feet (Tcf) of gas. By comparison, CSG resources in the US are estimated at approximately 70-150 Tcf of gas.

Total gas in the coal seams on the eastern coast of Australia is estimated to be approximately 250 Tcf. If the US is an applicable model for Australian shale gas, there is potential for vast recoverable resources.

Shale vs CSG

Like any upstream oil and gas opportunity, the ability to develop shale gas economically and capture customers is the key challenge.

Three key benefits associated with shale gas production, when compared to CSG production are:

1. The potential to obtain high initial gas flow rates

2. The ability to “˜choke back’ production

3. The absence of co-produced water once the fracture stimulation fluid is recovered.

A fuel for the future?

With the rapid acceleration in technology development in recent years, particularly associated with completion and multi-stage fracture stimulation, those companies with the best geological plays, proximity to infrastructure, and access to multiple markets will be best placed over the long-term to successfully harness the potential of Australian shale gas.

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