As reported in The Australian newspaper, Boston consultant Lux Research has issued a study declaring Australia "the next big energy market" for shale ahead of China.
Australia has overtaken China, where exploration is struggling to gain traction and other nations that pose too much regulatory risk. Australia has existing infrastructure and low population density in resource-rich regions.
Some recent entries by major overseas oil companies into Australia confirm the Lux Research findings. Early last year Chevron (NYSE: CVX), announced a deal to spend up to $350 million exploring for shale gas with Beach Energy (ASX: BPT) in the Cooper Basin. Another recent entrant, Magnum Hunter Resources (NYSE: MHR), scoured the world for opportunities before deciding that joint ventures with Australian companies were the best alternative. Magnum Hunter's head of exploration, Kip Ferguson, said, "as North America becomes highly saturated and opportunities become more scarce, companies with broader thinking need to look abroad".
Santos' (ASX: STO) Vice President for Eastern Australia, James Boulderstone, last month stated that "a large number of international experts see the Cooper Basin as the pre-eminent shale resource outside of the United States". It is the only region outside the United States that is commercially producing shale gas.
He was commenting on a second successful drilling of a shale gas well, which will result in commercial production and a "potentially material" extension of its Moomba North gas field.
Another way to gain exposure to the well is via Origin Energy's (ASX: ORG) 13.19% holding and Beach Energy's 20.21%, with Santos having 66.6% ownership. Another alternative for exposure to both local and international shale gas is an investment in mining services company WorleyParsons (ASX: WOR), which has developed a high level of expertise in unconventional oil and gas (shale) and is well positioned to benefit from the expected strong growth in activity in this sector.
Purchasing WorleyParsons is an excellent way to gain exposure to continued growth in global hydrocarbons capital expenditure, which accounts for approximately 70% of its revenue. It has broad international diversification, with over 80% of FY 2013 revenue generated outside Australia. No other local mining services company has this material offset against the stagnant Australian mining services sector.
Foolish takeaway
The unconventional gas boom in the U.S. is testimony to the potential for Australia and in particular Santos and WorleyParsons. In my opinion, it is an opportune time for medium-to-long term investors to gain exposure to both blue-chip companies.
