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By Helen Clark
- U.S.-style scale and efficiencies to drive down costs
- Vast shale basin could fill new LNG trains
- Developers want to avoid the mistakes of the U.S. shale gas revolution
DARWIN, Australia, Sept 8 (Reuters) – The developers of Australia’s Beetaloo Basin are bringing in U.S. equipment, money, expertise and – they hope – U.S.-style scale and efficiencies to reduce costs and make the country’s first shale gas project economically viable.
The Beetaloo shale formation, which delivered its first gas this month, is often compared with the prolific Marcellus shale in the U.S., but its remoteness deep in the Northern Territory means billions of dollars will be needed to build pipelines.
The development’s success could open a new source of LNG supply for Asia, but first well costs must come down by as much as 60% in a region that lacks the infrastructure and supplier networks of mature U.S. basins.
It also faces challenges from Canberra’s new policies over gas use, even as the Territory government is all-in on a project that developers hope can produce 1,000 terajoules a day, enough to feed two liquefied natural gas (LNG) trains.
“This is the most supportive regime I’ve ever worked under, the most supportive government I’ve worked under, and that includes Texas,” Tamboran Resources (TBN.N) CEO Todd Abbott, a Texan and veteran of the U.S. shale patch, said during the ceremony last week where an inaugural 40 terajoules of gas was sent to Darwin.
The optimism contrasts with industry wariness after a decade of increased energy regulation in Australia, the world’s No. 2 LNG exporter.
Australia-based Tamboran is backed by fracking services firm Liberty Energy (LBRT.N), founded by U.S. Energy Secretary Chris Wright, and U.S. oilfield services giant Baker Hughes (BKR.O).
It has brought in high-powered rigs made by U.S.-based Helmerich & Payne.
LESSONS LEARNED
Beetaloo developers hope to avoid mistakes of some U.S. shale developers, who prioritised drilling over sales.
The focus of Tamboran’s initial gas sales is on understanding well decline rates and reservoir performance before committing to larger-scale development. The company and its partners have so far spent about A$1 billion ($722 million) on exploration and appraisal drilling.
“We’ve already avoided a lot of what we did in the U.S. just by focusing on the right things, focusing on cash flow, focusing on EBITDA (earnings before interest, taxes, depreciation and amortisation),” Stephanie Reed, chief operating officer of Texas-based Formentera Partners, told a recent industry conference in the Northern Territory capital.
Formentera, which has a share of Tamboran’s Beetaloo project, plans to drill its own acreage in the basin next year.
CONTROLLING COSTS
To be sure, drilling and completion costs remain substantially higher in the Beetaloo than in mature U.S. shale basins. Rami Yassine, Eastern Hemisphere president of U.S. oilfield services giant Halliburton (HAL.N), said U.S. rig use had fallen 30% as efficiency improved.
Industry executives estimate well costs must fall by 40% to 60% for the basin to reach its full potential. Developing local sand supply for hydraulic fracturing is part of that effort.
Operators reported roughly 25% improvements in completion efficiency between Beetaloo drilling campaigns. One service provider estimated continuous drilling alone could reduce rig costs by about 30%.
Expanding local supplier and workforce capacity would boost project economics by reducing the need to transport equipment and materials over long distances, industry players said.
“Today, we are at a phase in the Beetaloo Basin, where we need to collaborate as an industry,” Halliburton’s Yassine said.
Reporting by Helen Clark; Editing by Tony Munroe and Tomasz Janowski
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