According to the Energy Information Administration (EIA), there are 7,299 trillion cubic feet of shale gas resources located around the world. That’s as of June 2013.
That number represents a 10% increase over its 2011 estimate. In all likelihood, worldwide shale gas reserves will continue to increase as reservoir evaluation continues.
When it comes to unconventional oil and natural gas production, there’s no question the U.S. has the lead by a long shot. After all, fracking and horizontal drilling are a U.S. invention dating back to the 1980s. They’ve been honed and improved upon for the last three decades.
Other countries with large shale reserves are envious of the success the U.S. has had. They too are anxious to replicate it on their own soil, so who’s the next big player that you could get in on early…?
Australia is angling to be the next big unconventional natural gas producer. We’ll get to why in a moment, but first let’s look at where the world’s top shale gas reserves are.
World Shale Gas Reserves
Even though the U.S. has had great results recovering shale gas, its reserves are only the world’s fourth largest. The list below shows the top ten recoverable shale gas reserves, in trillions of cubic feet.
1. China 1,115
2. Argentina 802
3. Algeria 707
4. US 665
5. Canada 573
6. Mexico 545
7. Australia 437
8. South Africa 390
9. Russia 285
10. Brazil 245
While the Chinese have the largest shale gas reserves, there’s very little drilling going on there. Complex geology, lack of equipment, water supplies and engineers familiar with horizontal drilling and fracking, has left the Chinese shale gas fields largely untouched.
Even if the Chinese are eventually successful, many of the fields are thousands of miles away from population centers. The pipeline infrastructure necessary to transport the gas simply doesn’t exist.
Argentina has a few companies interested in its 22.7 trillion cubic meters of shale gas and 27 billion barrels of shale oil. It has the world’s second largest reserves.
However, so far, most companies are in hold mode when it comes to Argentina. Fears over political uncertainty and regulatory issues are the main roadblocks.
Shale’s Next Big Play
Hydraulic fracturing has given newfound oil and gas wealth to the U.S. Now, other nations want to clone America’s success.
According to a study by Lux Research, Inc., Australia is likely to be the next big play in unconventional oil and gas. Daniel Choi, a Lux Research Associate, had this to say about Australia’s progress: “Australia’s strong infrastructure, low population density and legacy of mining; Argentina’s powerful government incentives; and China’s seemingly bottomless development capital make the three countries clear front-runners in this race.”
For reasons mentioned above, Australia is emerging as the frontrunner. With 437 trillion cubic feet of recoverable natural gas reserves, Australia is the world’s seventh largest play.
It also has significant shale oil reserves. The Energy Information Administration (EIA) studied Australia’s reserves and estimated them at 17.5 billion barrels of oil equivalent.
Currently, Australia’s annual oil production is 192 million barrels, according to the EIA. Australia has several basins of interest when it comes to shale oil and gas reserves. Check out the map below courtesy of Advanced Resources International.
The largest is the Canning basin in the northern part of Western Australia. In addition, the Georgina and Beetaloo basins in the northern territory and western Queensland respectively are other potential targets.
Coastal Queensland has the smaller Maryborough basin. It’s closer to populated areas, but is smaller. The Perth basin in Western Australia is also small, but very close to Perth.
However, the EIA noted that activity in one basin was ahead of all the rest. “Of the six assessed basins the Cooper Basin, Australia’s main onshore gas-producing basin, with its existing gas processing facilities and transportation infrastructure, could be the first commercial source of shale hydrocarbons.
“Santos Limited (ASX:STO), Beach Energy Limited (ASX:BPT) and Senex Energy Limited (ASX:SXY) are testing the shale reservoirs in the Cooper Basin, with initial results from vertical production test wells providing encouragement for further delineation.”
Why all the interest in the Cooper basin? According to the Australian government’s forecast, demand for natural gas on the country’s east coast is going to triple by 2020.
The Cooper basin, even though it is in a remote area has plenty of existing gas processing infrastructure and pipelines to population centers. The reason is the Cooper basin has a lengthy history of conventional oil and gas production.
Queensland has a number of LNG export facilities under construction. These are in anticipation of large quantities of shale gas that will eventually flow from the Cooper basin.
The Best Way to Play Australia’s Shale Boom
There’s one American company that’s also doing some prospecting in the Cooper basin. The company’s executive vice president of exploration feels the Cooper is going to be Australia’s first big shale play.
“Within 12 months, you’re not going to have the ability to find a deal, or find acreage, in the Cooper,” he said. “And North America is pretty well tied up.”
This past December, this company became the largest shareholder of a small Australian company that is active in the Cooper basin. Readers of my exclusive service, Wealth From Power will receive a special report next week on this company.
Compared to the U.S., Australian unconventional oil and gas production is in its infancy.
Speculators might want to consider shares of some of the junior exploration companies listed above.
Be forewarned that most have very small market capitalizations, and you should consider them highly speculative. A better way would be to buy shares of the American company I’ll be writing about in my next Wealth From Power update.
Profitably yours,
Peter Fallon.
Note from Midas Legacy Editor: Peter retired in his early 50’s after a successful career in the fields of energy and technology. His success as an investor and business owner spans over 40 years, and he has now combined his experience with his knowledge and passion for energy, technology, and investing. He is also the editor of our energy stocks recommendation service, ‘Wealth from Power’, available by invitation only.
