ASX-listed junior oil and gas exploration and production company Central Petroleum (ASX:CTP) has signed a deal with France’s Total (NYSE:TOT) for exploration of six million acres in the Southern Georgina Basin of Australia prospective for shale gas.
The French energy giant has agreed to fund 80% of exploration and appraisal costs over four years in four of Central Petroleum's shale gas exploration permits (EP(A)132 in the Northern Territory and ATP(A)909, ATP(A)911 and ATP(A)912) in central Australia in Queensland and Northern Territory.
Under the agreement Total will fund US$48 million of the first stage of exploration, Central will fund the next US$12 million. Depending on exploration success, Total may elect to fund another US$104 million for stages two and three.
Following the third stage Total could hold up to 68% of the four permits and would begin operating 90% of the acreage.
The global unconventional gas market is gaining momentum and the petroleum sector in Western Australia has already seen a ramp up in activity. It has generated particular interest since US supermajor ConocoPhillips earned a 75% interest from New Standard Energy in exchange for $A113.5 million in drilling, coring and evaluation costs.
But, while the Georgina Basin is less developed than the Cooper, Perth and Canning Basins, it is attracting attention. Earlier this year, PetroFrontier Corp. farmed out a 65% interest in its six permits in the basin to Statoil for A$205 million. In October 2011, PetroFrontier drilled Baldwin-2Hst1, Australia's first horizontal well in the Lower Arthur Creek "Hot Shale" Formation in the southern Georgina Basin.
“At the time Statoil described the areas as 'immature but potentially highly prospective play at low cost, with high risk but also with significant upside,” noted RBC Capital Markets analyst Peter Hutton in a note to investors today.
Hutton said RBC believes the deal "represents low cost access for Total, which is continuing to increase its global exploration portfolio in line with its bolder strategy. Total is also a 27.5% partner in Santos-operated Gladstone LNG in Queensland."
Central Petroleum Ltd. operates the largest holding of prospective onshore acreage in Australia totaling over 270,000 km2, c.70 million acres. This acreage includes permits already awarded and acreage under application with 250,000 km2 under the Petroleum Acts and 20,000 km2 under the Mining Acts mainly in the Northern Territory with smaller holdings in Western Australia, South Australia and Queensland.