Lloyds Plans to Help Finance Investments in Australian Shale Gas

Lloyds Banking Group Plc (LLOY), the London-based lender, said it is in talks with U.S. energy companies to help finance shale gas investments in Australia.

“The next shale gas opportunity will be Australia,” Andrew Moorfield, managing director and global head of oil and gas at Lloyds, said in a phone interview from Sydney. “We believe it’s the next big play and that the shale gas story in Australia is going to happen faster than people expect.”

Companies are keen to bring their experience developing shale resources in the U.S. to Australia, tap Asian natural gas demand and secure inexpensive prospects compared with assets in North America, Moorfield said, declining to name the companies weighing transactions. Australia holds almost 400 trillion cubic feet of estimated shale gas resources that may be recoverable, according to the U.S. Energy Information Administration.

ConocoPhillips (COP), the third-largest U.S. oil company, and BG Group Plc (BG/), the U.K.’s third-biggest gas producer, are individually planning to fund shale gas exploration with partners in Australia.

Most of the initial companies investing in Australian shale projects and seeking partnerships in the country are likely to be smaller oil and gas companies, Moorfield said yesterday.

Beach Energy Ltd. (BPT) and AWE Ltd. (AWE) are among Australian companies developing shale gas resources in the country. Senex Energy Ltd., exploring for shale gas in central Australia, said it has held initial talks with global companies interested in a possible partnership, Managing Director Ian Davies said Aug. 2.

Talks in Progress

“Financing discussions are well-progressed across a range of our offices with companies looking to enter Australian shale gas,” Moorfield said. “What we’ll see is steady foreign investment into shale gas in Australia, and that investment will primarily come from the U.S.”

Hunting Plc (HTG), a U.K. oil-services provider, said earlier this month it would use a loan from Lloyds, Barclays Plc and Royal Bank of Scotland Group Plc to help fund the purchase of Titan Group. The $775 million acquisition of Texas-based Titan gives Hunting technology for fracturing shale rock.

A labor shortage and insufficient infrastructure are potential obstacles for Australian shale, Moorfield said. Drilling costs in Australia are higher than those in the U.S., and “marginal economics may make development challenging,” Citigroup Inc. analysts in Sydney said in a July report.

To contact the reporter on this story: James Paton in Sydney at jpaton4@bloomberg.net

To contact the editor responsible for this story: Andrew Hobbs at ahobbs4@bloomberg.net.

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