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BHP interested in WA shale gas

Although it is predominantly focused on the shale boom in the US, mining heavyweight BHP Billiton (ASX: BHP) has stated that it is eager to learn about the massive onshore shale gas reserves located in resources-rich Western Australia, including the state’s Canning Basin.

Steve Pastor, the company’s head of conventional gas business, said, “We’re interested in expanding what we learn there to any basin in the world that is economically viable, and so I look forward to personally learning more about the Canning Basin and talking with (Western Australia’s Premier Colin Barnett) about opportunities to enter into that, but today we’re primarily focused on shale in the United States.”

According to a HSBC report released early this week, Australia has the seventh largest shale gas reserves in the world, but the industry’s development could be hindered by lack of infrastructure such as roads or pipelines.

Canning Basin

According to The Australian Financial Review, the Canning Basin stretches from the WA coast between Port Hedland and Broome to the state’s eastern border and is roughly 530,000 square kilometres in size. It is thought to hold around 229 trillion cubic feet of unconventional gas resources. To put this into perspective, that figure represents roughly one-and-a-half times the size of the state’s offshore gas resources that have currently been identified.

The basin has received attention from companies such as Mitsubishi and Buru Energy (ASX: BRU) – which have committed to $60 million for exploration in the region. Meanwhile, ConocoPhilips also plans to spend around $120 million on seismic testing.

Foolish takeaway

During the 2012-13 year, BHP spent US$4.8 billion on onshore US shale assets, making its petroleum division the company’s second highest earner. Getting involved in shale projects in WA could prove to be very profitable for the miner, although increased supply would put downwards pressure on gas prices.

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Motley Fool contributor Ryan Newman does not own shares in any of the companies mentioned.

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