BG’s QGC unit agreed to invest A$130 million ($143.5 million) to search for so-called unconventional gas in Australia’s Cooper Basin, according to a statement today from BG’s partner, Drillsearch Energy Ltd. (DLS) Shale gas is held in rock and extracted by forcing water through layers of sediment.
The partners will develop shale gas in the Cooper Basin to supply eastern Australia and liquefied natural gas exports, Drillsearch said. QGC will have a seven-month option to buy 31.6 million shares in Drillsearch, or about 9.9 percent of the company, at 62 Australian cents a share, a 17 percent premium to yesterday’s closing price.
BG, Britain’s third-largest gas company, is expanding into Australian shale after almost doubling its output goal for U.S. shale gas in February, targeting 190,000 barrels of oil equivalent a day by 2015. Producers are adding unconventional assets, which include shale and coal-bed methane, as rising demand and technological advances make prospects economically viable.
“The Cooper Basin is highly prospective for shale gas and QGC believes it has secured a key position,” Neil Burrows, a BG spokesman, said today in an e-mail. The partners may drill as many as six wells by 2015.
BG, based in Reading, England, will be the second non-local explorer after ConocoPhillips (COP) to search for shale gas in Australia. Sydney-based AWE Ltd. (AWE) and Beach Energy Ltd. (BPT) have also sought partners for shale exploration.
Drillsearch rose 11 percent to 59 Australian cents in Sydney trading after the announcement, valuing the company at A$179.5 million. BG shares fell 1.4 percent to 1,465.5 pence in London.
QGC will acquire 60 percent of the ATP 940P license, covering 2,000 square kilometers (770 square miles) in the Cooper Basin, according to a Drillsearch presentation on its website. The partners will explore the Nappamerri Trough Shale Gas Fairway, which may hold 85 trillion cubic feet of resources according to the U.S. Department of Energy, through June 2016.
BG said in February that success in finding further gas resources may lead it to expand its $15 billion Queensland Curtis LNG venture in Australia. BG invested $1.8 billion in the project in the first half of this year, Chief Executive Officer Frank Chapman said yesterday. It plans to ship the first LNG in 2014.
The U.S.’s shale-gas boom propelled the country into first place among global gas producers in 2009. BG invested $130 million acquiring more shale gas acreage in the U.S. in the second quarter, Chapman said. Last year, BG and Exco Resources Inc. (XCO) bought the Haynesville and Bossier shale assets in the U.S. from Southwestern Energy Co., after previously expanding in the Appalachian Basin with the purchase of Common Resources LLC.
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