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Why Buru Energy Limited saw its shares sink today

Oil and gas explorer Buru Energy Limited (ASX: BRU) saw its shares drop 2.9% to $1.18 today, close to its 52-week low of $1.08.

It wasn’t the only oil and gas company to get whacked today either. Senex Energy Limited (ASX: SXY) lost 2.8%, while Strike Energy Ltd (ASX: STX) was hammered down 4.4%. Horizon Oil Ltd (ASX: HZN), in the midst of a merger with Roc Oil Company Limited (ASX: ROC) also had a down day, losing 1.3%.

Perhaps the biggest concern was a report released by EnergyQuest. The report notes that Russia’s giant $400 billion deal to supply China with gas over 30 years, has serious consequences for Australia’s liquefied natural gas producers. This in turn may feed down into Australia’s smaller oil & gas explorers, such as Buru.

EnergyQuest says they need to drastically cut costs to remain competitive, with Australian LNG plants estimated to cost US$3,500 per tonne of capacity per year (tpa), compared to Gazprom’s China project costs of around US$2,000 tpa.

Other large oil and gas companies have downplayed the threat, and with Buru holding large swathes of acreage in the Canning Basin in WA, it could be worthy of a closer look.

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Motley Fool writer/analyst Mike King doesn't own shares in any companies mentioned. You can follow Mike on Twitter @TMFKinga