Mitsubishi Corporation ("MC") announces that it has exercised its option to acquire a 50% interest in the unconventional resources in the onshore natural gas and crude oil exploration permits in the Kimberley region of Western Australia from Buru Energy Limited ("Buru"), Head Office: Perth, Western Australia; an oil and gas exploration and production (E&P) company.
In June 2010, MC acquired a 50% interest* in thirteen conventional oil and gas exploration permits owned by Buru in the Canning Superbasin located in the Kimberley region, including the discovered gas accumulation at Yulleroo. Since acquiring this interest MC and Buru have undertaken an exploration program. In 2011 the Joint Venture made a new oil discovery (Ungani) as well as a further gas discovery (Valhalla).
Further to these conventional resource rights, MC has also acquired a 50% interest* in the rights to all unconventional resources (shale gas, tight gas and shale oil, etc.) from Buru in these exploration permits by committing to fund 80% (A$40 million) of the cost of the exploration and appraisal program (up to A$50 million), for unconventional resources which will be implemented in 2012 onward.
The development of unconventional oil and gas resources in Australia is at an early phase compared with North America and other regions. However, in recent years, several major energy agencies and leading energy consultants have advised that the Canning Superbasin is one of the world's most prospective basins for unconventional resources and is considered to contain the largest unconventional resources of all of Australia’s prospective basins. This year has seen the entry of major E&P companies into the region focusing on these unconventional resources.
The Joint Venture will consider development options for any significant gas reserves identified including the supply of gas to the domestic gas market in Western Australia and supplying feed gas to existing or new LNG projects.
MC plans to invest a total of more than A$100 million (portion borne by MC) in this endeavour, including current activities and those planned for the future. In the near term, MC aims to progress appraisal and commercialization of the gas and oil accumulations already discovered. In parallel, MC will continue with its long-term exploration and appraisal program for unconventional resources in the basin, with the objective of maximizing value through the development region's energy resources.
*Note: MC's respective interest in 13 owned exploration permits varies between 37.5%~50%.
While conventional resources are trapped in permeable reservoir and can be extracted readily and easily once drilled, unconventional resources are trapped in low-permeability sandstone (tight sand gas) or shale, a layer of solidified sediment referred to as source rock (shale gas or shale oil). Since these resources are found trapped in sediments of extremely low permeability, it is difficult to extract and has not been commercially developed until recently. Recent advances in technology have enabled to the large scale development of unconventional resources as a viable energy resource.
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