More gas in the pipeline � for a price - Business - Business

GAS that is hard to extract is big business in the US, but Australian investors remain wary of local "tight" gas projects and analysts say a higher gas price may be needed to get them off the ground.
Geologists involved in the US industry say there are trillions of cubic feet of gas locked up in tight reservoirs in Australia, and all we need is a high enough gas price to justify extracting it.
Tight gas deposits are held in rocks that have low permeability, which prevents the gas from flowing easily.
To allow the gas to flow, the pores in the rocks have to be opened up through a process known as fracturing.
There are different methods of fracturing and a good understanding of the geology one is dealing with is crucial for success. In the past, producers have used nitroglycerine to fracture tight rocks.
Now producers pump fluid containing sand down a well and into the rock at pressure, which creates small fractures.
These are then held open by the sand particles, allowing the gas to flow.
Robert Merrill, a geologist with 30 years' experience in the US petroleum industry, says the process can be expensive.
In the US, gas prices of $US7 (about $A9) per thousand cubic feet help make tight gas projects economic.
Mr Merrill said that in Australia, with gas prices at about $3 per thousand cubic feet, tight gas projects were on the border of becoming commercially viable.
"We are probably just about there, but at this price it is not going to generate a lot of activity," he said.
Mr Merrill, president of exploration company Catheart Energy and a former divisional president at energy giant Unocal, is working with Victorian company Lakes Oil on developing its tenements. Lakes Oil has tight gas tenements in the onshore Gippsland Basin and has just signed a memorandum of understanding with a subsidiary of Chinese oil giant Sinopec to work towards commercialisation.
Mr Merrill says tight gas deposits make a large contribution to total gas production in the US and is big business.
AAP