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Buru Energy – Shale be right

Western Australia Environment Minister Albert Jacob has given Buru Energy and other shale gas explorers the ‘thumbs up’ to get on with hydraulic fracturing of shale gas formations in the state’s Canning Basin and beyond.

Buru itself has about 100,000 square kilometres (gross) of prospective acreage in an area with independent experts plotting the contingent resource at more than 47 TCF (trillion cubic feet) of gas. There’s no CO2 and plenty of liquids making the Canning Basin very attractive.

Extensive 3D and 2D seismic surveys are needed to de-risk the exploration required over the acreage. Buru has some good partners to assist including a drilling crew from US fracking experts Halliburton arriving soon at the company’s Ungani project (10 MMbbl resource) which covers about 1 million acres.

Ungani is Buru’s path to cash flow with more than 1,200 bopd (ramping up to 1,500 bopd) being trucked 800 km to Wyndham. Ungani is just 130 km by road to Broome so the alternative route is being investigated to take 3-5,000 bopd by 2015 as the company target.

Buru has farmed out part of the nearly 16,000 sq km of coastal permits to Apache in return for a firm $32.2m program with an addition $20-40m dependent on results.

The Laurel gas formation (BRU 75%) has already been defined through drilling and shows sweet gas with low CO2, no hydrogen sulphide and is high in liquids. Funding for the pre FEED (2014), FEED (2015) and development (2016) can be funded from the company’s own resources.

The company has $45 million of cash.

World shale

The EIA (US Energy Information Administration) shows that Australia’s shale resources are huge with 235 TCF in the Canning Basin the largest followed by the Cooper Basin (93 TCF), Perth (33 TCF), Maryborough (19 TCF) and others (57 TCF).

Unlike the US however, where favourable above-ground conditions, availability of drilling technology (horizontal and vertical) as well as heavy investment, most of the rest of the world’s technically recoverable reserves remain mere figures on a table until regulatory settings make these reserves economically recoverable.

The IEA (International Energy Agency) says that US$48 trillion of investment is required to meet the world’s energy needs over the period to 2035. About $40 trillion is needed to meet energy supply while the rest is used for improving energy efficiency. Less than half the $40 trillion will be spent on growth in demand. Most of the balance will be used to offset declining production and replacement of power plants and other assets.

How much investment finds its way into the Australian shale gas industry is an open question for now. Australia’s abundant natural resources are a significant asset that need companies like Buru to take up that risk and it is decisions like that of the WA government that will help.

Buru’s prospects look interesting but are high risk.

 

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