Australia begins shale production

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ADELAIDE, Australia, Oct. 22 (UPI) -- Australian oil and gas company Santos Ltd. has launched the country's first commercial shale gas well in the Cooper Basin in South Australia.

South Australian Premier Jay Weatherill, who turned on the tap on the Moomba-191 well Friday, called it a "game changer" for Australia's economy, noting the affect shale gas has had on the U.S. economy over the past five years, where shale accounts for more than half of total natural gas production.

"Unconventional gas has always been regarded as something that would happen in the future but today's opening demonstrates that that future has arrived," Weatherill said in a statement.

"The U.S. economy has been transformed by the exploitation of the massive shale gas reserves, which has also led to the re-emergence of their advanced manufacturing sector."

Weatherill says the connection would lead to natural gas from unconventional sources being increasingly used in households across South Australia and eastern Australia.

Santos said the well is 383 yards from the existing pipeline network and 5 miles from Moomba's gas processing plant, making it possible to be brought on line quickly.

Santos has a 67 percent stake in the Cooper Basin joint venture, with Beach Energy owning 20 percent and Origin Energy 13 percent.

"While this is the first commercial shale well, and more work will be required to unlock the area's full potential, this is clearly a landmark for Australia's natural gas industry," said James Baulderstone, Santos' vice president of Eastern Australia.

The connection of Moomba-191, he said, "is a significant step forward as we work to unlock the vast unconventional potential of the Cooper Basin."

The U.S. Energy Information Administration estimates that ''technically recoverable'' shale gas resources in Australia could be as much as 396 trillion cubic feet.

Bernstein Research analyst Neil Beveridge said earlier this month that Australia is at the forefront of the global shale revolution outside North America and is likely to be an "early adopter" of shale development, Platts news service reports.

There's "a growing list" of international exploration and production companies with North American shale experience farming into Australian shale acreage willing to provide the necessary capital expenditure requirements, the analyst said.

Beveridge noted, however that commercial shale production can be more difficult in Australia than in the United States because of water issues, infrastructure capacity and limited domestic gas markets.

"Of particular challenge to Australia are (the) high costs which are endemic throughout much of the Australian exploration and production industry," Beveridge said, citing the lack of service-related equipment, such as rigs which could slow the exploration progress.