ExxonMobil Corporation
(
XOM
) through its affiliate − Esso Ventures Pty Ltd. − has inked an
agreement with Ignite Energy Resources Ltd. for coal-seam-gas
exploration in Victoria, Australia. The financial aspects of the
transaction were not disclosed.
Per the deal, ExxonMobil will purchase an initial 10% stake in
Ignite's exploration license, EL 4416, in the Gippsland Basin of
southeast Victoria. The parties are entitled to explore as well as
develop methane gas reserves naturally available on the surface of
the Gippsland Basin. The license − spanning approximately 3,800
square kilometers − is estimated to hold approximately 16 billion
metric tons of brown coal.
Ignite will act as the operator in the initial phase of the
venture, under which the group will work together over the next
12-18 months. They will assess the natural gas potential in the
deeper coal seams of the license and its commercial viability.
Coal-seam-gas is largely methane gas trapped in the molecular
structure of coal seams as against conventional natural gas, which
is stored in the gaps between rock formations. As a result, coal
seams are able to contain several times more gas than found in
traditional gas reservoirs.
Although the ExxonMobil-Ignite patch up in Gippsland is small
relative to other big investments in other parts of Australia, its
proximity to the existing midstream infrastructure such as
pipelines and gas processing facilities, is an added advantage.
Again, ExxonMobil's expertise from over 50 years of conventional
oil and gas drilling in the Bass Strait will likely help it to
formulate geological data for the region's potential for
coal-seam-gas output. The Bass Strait is a stretch of water between
Victoria and the island state of Tasmania. Around two-thirds of the
Gippsland Basin is located in the shallow waters of the Bass
Strait, with the balance extending onshore in southeast
Victoria.
Many major energy companies have expended dollars on
coal-seam-gas deals in Australia. Queensland, the country's
northeastern state was approached by companies like
Royal Dutch Shell Plc
(
RDS.A
),
ConocoPhillips
(
COP
) and BG Group PLC back in 2008 with offers of more than A$20
billion (U.S.$19.5 billion). These offers were backed by
Australia's secure political structure, transparent regulatory
system as well as its nearness to fast-growing energy markets in
Asia that make it more attractive to investors.
Importantly, exploration in the Gippsland Basin will involve
nominal or no fracking and hence might draw less disagreement in
Victoria compared with anywhere else in the country. This is mainly
because of the dearth of resource wealth that Victoria faces -
unlike the resource-affluent Western Australia and Queensland - and
few new conventional-gas finds in the state's traditional Bass
Strait supply hub.
The U.S. energy behemoth, ExxonMobil, is one of the leading
energy investors in Australia. It owns a refinery in Victoria and
many large conventional oil and gas fields. ExxonMobil enjoys a 25%
share in the country's largest gas supply − the $43 billion Gorgon
gas project.
We maintain our Neutral recommendation on ExxonMobil for the
long term. The company holds a Zacks #3 Rank, which is equivalent
to a Hold rating for a period of one to three months.
CONOCOPHILLIPS (COP): Free Stock Analysis
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