AUSTRALIA

Shale stall?

IS SANTOS dragging its feet on developing its Cooper Basin shale project?

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Before the howls of protest come, let me acknowledge that the company is clearly getting some work done up there.

Just last week it took a group of journalists on a tour of its Moomba 191 shale well. That well, though, has been around for a fair while.

The Cooper is an unusual example in the whole shale debate.

It is so far away from anywhere it seems there is little chance of strong green protests. One might wonder, if you frac in the Cooper, does anybody notice.

Therefore, the permitting side should be a little bit easier than it is for other projects.

There is also infrastructure in place to get any shale gas from the Cooper to either export projects or domestic users.

That is often one of the big hold-ups with prospective shale projects.

First the company has to find the hint of shale gas then it has to get it permitted. All of that can be for nought though if there is no means of getting the gas to market.

For Santos that is clearly not the case.

But why should Santos rush to get the gas out of the ground?

People seem to forget that shale gas is not as cheap to obtain as conventional gas.

Therefore the sales price needs to reflect that extra effort.

A recent Australian Council of Learned Academies report says shale gas will require a price in the order of $6 to $9 a gigajoule to make its production and transport profitable.

The report says the east coast wholesale gas price is about $6 a gigajoule.

So why rush? Why not wait for that east coast price to rise?

Rise it no doubt will in a couple of years when the LNG export projects at Gladstone start up.

It will particularly hit New South Wales, which produces just 5% of its gas, which comes from coal seam gas wells at Camden.

The rest of its gas comes from the Cooper Basin and Queensland gas projects. Gas from those wells will be shifted to the Gladstone exports when they come onstream.

At a briefing on the sidelines of the Association of Petroleum Production and Exploration Association 2013 conference and exhibition, Santos staffers said the gas it had in the Cooper would be enough to supply NSW for one year.

That does not count for its shale potential though.

NSW, though, is another state that does not seem to be in a hurry to rectify its problems.

It has a wealth of CSG but lacks the political will to get it.

Instead, it seems to be waiting anxiously in the hope that Santos will get its shale projects into gear before the supply crunch comes.

Speaking at APPEA, NSW Resources Minister Chris Hartcher admitted the state did have a gas supply problem.

He also acknowledged that CSG was very much on the nose with the NSW electorate, pointing to a letter he received from a convent in Lismore, protesting against CSG. When the Lismore nuns are complaining, you know you've got a problem.

Santos could do the state a favour here by developing its Cooper shale early. That way NSW could fix its gas problems and not have to cop the political fallout because the gas is not coming from within state lines.

Actually, Santos could prove the answer to NSW's gas woes but the state will need to bite the bullet here.

Santos has a project proposed for a small part of the Pilliga Forest region. It is looking at sinking 400 wells over 20 years there.

The project would initially look to extract and ship 100 terajoules of gas a day initially and eventually grow to 250TJ/d.

All it needs is a bit of NSW government backbone to get the project permitted.

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