ONE of India’s largest oil and gas refiners has heralded the dawn of a new era of Indian investment in Western Australia after signing up to hunt for shale gas just north of Perth.
Bharat Petroleum Corp, India’s second largest petroleum refiner, last week agreed to spend $15 million to earn a stake in two major gas permits near Dongara.
The deal is Bharat’s third in the region in recent years. Last year, it was a member of the Petronet consortium which struck a $25 billion long term supply deal with the giant Gorgon liquefied natural gas project, while in 2007, it acquired 20 per cent of a major offshore gas permit in the Timor Sea.
Under the latest deal, Bharat will acquire half of Norwest Energy’s 55 per cent interest in the EP413 shale gas permit, located onshore between Eneabba and Dongara, and buy into Norwest’s wholly owned TP15 permit which lies immediately offshore.
The cash will be put toward completion of at least one well in the permit next year to test for shale gas which could ultimately supply Perth via the nearby Parmelia and Dampier-Bunbury gas pipelines.
With WA arguably facing a shortage of new conventional gas supplies in the coming decade, the potential to extract gas from extensive shale beds in the Mid-West shapes as a possible game changer for local industry reliant on gas.
Like coal seam methane and other unconventional gas sources, shale often contains significant volumes of gas trapped within the rock that can be extracted by drilling and fracturing the host rock. In the United States, new fracturing technology has seen shale gas’ share of domestic supply rise from nothing to 15 per cent in a decade.
Shale gas exploration is already well advanced in the neighbouring permit held by AWE, in which a first shale gas resource is expected by the end of the year.
With shale gas development still in its infancy, Bharat chairman S. Radhakrishnan said his company considered the Norwest deal as an important step in its bid to become a vertically integrated petroleum producer, rather than just a refiner.
Critically, it offered the chance not only to generate early cashflow by supplying gas to the WA market but also provide Bharat with vital experience it could take back to India.
“The technology is in Australia and we would like to get into the industry, and do a little bit of learning in terms of marketing and technology,” Mr Radhakrishnan said.
“India is opening up for shale gas so that will help us to be one of the leaders in that space.”
Significantly for WA, Mr Radhakrishnan said Bharat would like to pursue other opportunities with local firms, both in WA and in India. Bharat has earmarked over $US4 billion to grow its business at home and internationally over the next five years.
“We could add a lot of value by co-operating with Australian companies … either upstream, midstream or downstream,” he said.
Economists and analysts have consistently predicted a wave of investment in the WA resources sector on the back of India’s rapid economic growth, just as investment from China has put a floor under the state’s economy.
But that influx has to date been little more than a trickle as Indian groups have struggled to compete with the Chinese since Aditya Birla acquired the Nifty copper mine near Telfer in 2003.
Last year’s $25 billion Gorgon offtake deal was therefore especially significant as a sign of India’s growing determination to pursue major opportunities in WA.
The Gorgon deal followed Perdaman Chemical and Fertilisers announcement of plans to build a $3.5 billion coal-based urea project at Collie, and the 2006 completion of an $800 million ammonia plant near Karratha by Pankaj Oswal’s Burrup Fertilisers.
However, it has also been gradually delving further into WA oil and gas exploration since 2004, when ONGC Videsh invested $7 million in an unsuccessful gas well in the Browse Basin.
More recent deals include Reliance Energy's $30 million exploration commitment to secure a major oil and gas permit in the Browse Basin, and Enso Group's $7 million entry to a string of permits in WA's remote onshore Officer Basin.
