Origin Energy will sell its interests in Australia’s Northern Territory Beetaloo basin – where expectations are high that the area could be on par with shale gas plays in North America – in a A$60 million (US$40.3 million) deal with Tamboran (B1), a joint venture owned by Tamboran Resources (ASK:TBN) and US oil and gas billionaire Bryan Sheffield.
The divestment does not come as a surprise given the amount of investor pressure that Origin Energy (ASX:ORG) has faced to cut its emissions, Atul Raina, vice president of upstream merger & acquisition analysis at consultancy Rystad Energy told Energy Voice.
The remote Beetaloo basin is a high-potential shale gas play with characteristics comparable to the Marcellus shale play in the US. However, it is emissions and capital intensive, and it carries relatively high risks, given the uncertainty surrounding any development – it remains in the exploration and appraisal phase – coupled with the lack of existing infrastructure, Krishan Pal Birda, a senior analyst at Rystad told Energy Voice.
Still, despite its exit, Origin remains exposed to the basin’s upside if a development goes ahead. It secured a 5.5% royalty from any future production and a 36.5 petajoules gas supply agreement as part of the deal.
Simon Molyneux, managing director at Perth-based upstream consultancy Molyneux Advisors, noted that exploration is non-core to Origin, and that Tamboran should be well placed to de-risk the assets and work to bring the gas to market. Indeed, Tamboran has previously announced ambitious goals to eventually export Beetaloo shale gas to Northern Asia markets, such as Japan, should development prove successful.
“The rocks in the Beetaloo basin are amazing, just need to get them flowing the gas to market,” said Molyneux.
Angus Rodger, upstream research director at Wood Mackenzie, noted there was “quite a lot to unpick from this move.”
“The key question is whether this decision is driven by Origin doubting the commerciality of the Beetaloo shales, or by the strategic discomfort of chasing decarbonisation targets alongside new oil and gas developments…or a combination of both,” he told Energy Voice.
“Despite public language supporting gas’ role in the energy mix and its own portfolio, it increasingly feels that Origin’s energy transition and decarbonisation-driven strategy is incompatible with capex-intensive shale gas exploration,” said Rodger. “As it continues along this path, divesting its entire exploration portfolio, it is likely the company will come under increasing pressure to also sell its 27.5% stake in APLNG when the time is right.”
Anne Forbes, an upstream analyst at Wood Mackenzie, added “the Beetaloo undoubtedly holds gas in organic-rich shales. The issue is producing commercial flowrates of gas in this geographically isolated area, generally regarded as sustained rates of at least ~5 mmcfd. Results so far have fallen below 5 mmcfd, although companies are still optimising their initial drilling and hydraulic fracture strategies,” she said. “Unfortunately, with Origin leaving, even more of the resource and appraisal work is now in the hands of smaller players, who will face challenges raising finance and maintaining momentum behind the Beetaloo story.”
Tamboran chief executive Joel Riddle said the company has expertise in fracking and hopes to start pumping gas from Beetaloo in 2025 using new generation rigs that drill 4000 metres horizontally into shale.
Tamboran today announced its acquisition of Origin Energy’s Beetaloo assets, funded through a placement and strategic partnerships to raise up to A$195 million.
Tamboran and Bryan Sheffield have agreed to jointly (50% each) acquire Origin Energy’s 77.5% interest in three Beetaloo basin permits (EP 98, 117 and 76) through a joint venture for an upfront cash payment of A$60 million plus a future production royalty, said Tamboran.
Sheffield bought a cornerstone 7.5% share in Tamboran after the gas junior listed on the ASX in 2021. Tamboran also owns other unconventional gas resources in the Northern Territory and Beetaloo Basin.
As a result of the latest acquisition, Tamboran noted it becomes the largest acreage holder in the Beetaloo basin with 1.9 million net prospective acres, resulting in a 270% increase in Tamboran’s estimate of net 2C contingent gas resources to 1.5 trillion cubic feet.
“We expect Beetaloo gas will deliver affordable, low-CO2 natural gas to Australia’s East Coast gas market and global LNG markets over the next decade,” added Tamboran.