Explorers target shale gas for Australia's next energy boom  

The Australian has a look at interest in unconventional (shale) gas in Australia - Explorers target shale gas for Australia's next energy boom.

A POTENTIALLY vast gas resource trapped in Australia's outback by dense rock formations could fuel another boom in the energy sector, at least according to companies like Beach Petroleum and Santos with acreage there.

But others are skeptical that shale gas locked in Australia's Cooper Basin can be produced economically like the Barnett and Haynesville shales in the US, or coal seam gas in Australia's northeast.

Innovative drilling techniques that can shatter rock with high-pressure bursts of water have made shale gas competitive with more conventional supplies in North America, where people typically pay more for gas. Citigroup says shale gas accounts for 13 per cent of the US's proven gas reserves and energy companies are staking out positions in European deposits.

They're being driven to unconventional fuels by a shortage of oil in countries that are politically stable and open to private investment.

Rough estimates suggest there are tens of trillions of cubic feet of shale gas in the Cooper Basin, which straddles Queensland and South Australia. Shale gas deposits are present in other regions like Western Australia, where AWE has plans to drill a test well.

While there's plenty of shale gas to plunder, the cost equation in Australia may not stack up for decades. "We remain unconvinced that the economics of the play will be able to compete with the significant coal seam gas volumes consistently being proven up in Eastern Australia," Merrill Lynch analyst Mark Hume says of Beach's Cooper resource.

Paul Balfe, managing director of energy consultancy ACIL Tasman, says coal seam gas costs about $2-$4 per gigajoule to produce, comparing favourably with Australian east coast domestic gas prices of $3-$4 a gigajoule and at least $7 a gigajoule in Western Australia.

The most optimistic cost estimates for shale gas are around $5 a gigajoule, with the more pessimistic at $8. Mr Balfe says a lack of drilling technology and expertise in mining shale gas in Australia may push production costs higher. "I suspect that $5-$8 might look more like $7.50-$10 here," Mr Balfe says.