Deep in Australia's Red Centre, gas is set to start flowing next month from the sprawling Beetaloo basin to Darwin 500 km (310 miles) north, in what developers hope kicks off the country's own U.S.-style shale revolution.
The prospects for the Beetaloo are vast. Geoscience Australia data shows it holds 7 trillion cubic feet of gas, fuelling local government dreams it will power data centres in the underdeveloped Northern Territory and feed liquefied natural gas sales to Asia from the world's second-largest LNG exporter.
But the challenges are big, too. It needs new pipelines that will cost billions of dollars to reach distant demand centres and faces political hurdles, including Australia's new policies requiring data centres to be primarily powered by renewable energy and LNG projects to reserve 20% of their gas for the local market.
Tamboran Resources (TBN.N) will send an initial 40 terajoules (37 million cubic feet) a day of gas from its Shenandoah project next month, followed later this year by Beetaloo Energy's (BTL.AX) 15 terajoules — modest volumes that will meet Darwin's daily use and help operators understand how quickly a well's gas might decline.
Tamboran CEO Todd Abbott, who joined in January from U.S. shale producer Seneca Resources, said in a decade the company expects to be producing more than 1 billion cubic feet of gas per day. That could fuel a 9% increase in Australia's LNG export capacity.
OLD ROCKS, NEW MONEY
The Beetaloo is frequently compared with the Marcellus shale in the U.S. but is far older at 1.3 billion years versus around 400 million, with much harder, more compacted rocks as a result.
It is also unique among shale plays, such as in the U.S. and Argentina, in that it has not already been developed as a conventional petroleum resource, said Martin Wilkes, a principal at RISC Advisory in Perth. So it lacks infrastructure.
So far, Tamboran and its partners have spent A$1 billion ($713 million) on exploration and appraisal drilling, a spokesperson said.
To fund development, Tamboran raised over A$280 million in April in Sydney and New York, where it listed in 2024 to tap investors more familiar with shale projects.
In addition to U.S. money, service providers from the American shale patch are active in the Beetaloo, including Liberty Energy (LBRT.N), whose founder Chris Wright is the U.S. energy secretary. It has supplied drilling rigs to Tamboran.
Early this year, Japan's top oil and gas company Inpex (1605.T) took a stake in Beetaloo acreage controlled by Texas-based Formentera Partners, in a symbolically significant vote of confidence as Japan is the main market for Australian LNG.
"You need a party with deep pockets who's willing to deploy billions of dollars over several years before being able to prove up a large-scale commercial play, and they've never had that until now," said MST Marquee analyst Saul Kavonic.
An Inpex spokesperson said the company had recognised the potential of the Beetaloo since 2012, when it greenlit its Ichthys LNG plant in Darwin.
There is no shortage of potential demand for Beetaloo gas.
Inpex has said the gas could help fill Ichthys or underpin an expansion.
Similarly, Australia's no. 2 gas producer Santos (STO.AX), which plans appraisal drilling in the Beetaloo, has approval to expand its Darwin LNG plant to 10 million tons.
Beetaloo Energy has proposed a data centre, one of roughly a dozen data centre projects planned for the Northern Territory that a regional official has said could use Beetaloo gas.
SHALE NEEDS SCALE
To match the U.S. shale revolution, scale and cost-cutting will be key.
Beetaloo CEO Alex Underwood said a small number of wells is expensive but costs fall once drilling is continuous.
"Understanding the interplay between capital expenditure and production profiles will really be the key determinant of how to scale up production in the future," he said in an interview.
Developers plan to use locally produced sand in their hydraulic fracturing, which Beetaloo Energy estimates could save A$5 million per well in transport expenses, a 15% reduction.
"It's minute efficiency everywhere. Pushing everything to its limit is what's making this stuff economic," Wood Mackenzie analyst Anne Forbes said.
($1 = 1.4025 Australian dollars)
