Buru / Mitsubishi Joint Venture Sign Agreement with Western Australia's State Government

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Researched by Industrial Info Resources (Sugar Land, Texas)--ASX Listed Australian energy company Buru Energy Limited (Perth, Australia) and joint venture partner Mitsubishi Corporation (OTC:MSBHY) (Tokyo, Japan) have signed an agreement with the Western Australian state government to develop the unconventional gas reserves in the Canning Basin.

The premier announced the agreement, adding, "This is possibly the most significant advance in developing of our natural resources, maybe since the development of Pilbara iron ore and the original Northwest shelf gas."

The agreement allows the joint venture partners to continue to explore for gas in the environmentally sensitive Kimberley region of Western Australia and to build a 600-kilometer (km) (375 miles), AUS$500 million ($520 million) natural gas pipeline to Port Headland. Buru already has confirmed that it will be looking to an outside company to build the pipeline. The U.S. Energy Information Agency (EIA) has identified the Canning Basin as the most prospective region for unconventional gas outside of the U.S., estimating the resource at about 229 trillion cubic feet, roughly equivalent to one-and-a-half times Western Australia's identified offshore resources.

Despite the massive potential of the Canning Basin, Buru Energy and Mitsubishi still need to ensure the project is commercially viable. Eric Streitberg, executive director of Buru Energy, said his company has already spent more than AUS$120 million ($125 million) exploring the Canning Basin and still had a long way to go. Under the agreement, if viable gas resources are confirmed by mid-2016, Buru will be required to submit a plan for a domestic gas project that links to the state gas network.

Buru will still be required to obtain state and commonwealth approvals for matters such as environmental impact, indigenous heritage and safety.

Premier Colin Barnett has said Western Australian consumers will be first in line for any gas produced, with the first 1,500 petajoules allocated to the domestic gas market. Streitberg has supported the Premier's statement, saying that the company always intended to supply the domestic market before considering exports. U.S.-owned aluminum giant Alcoa Australia (Pittsburgh, Pennsylvania) already has an agreement with Buru to purchase 500,000 terajoules of gas for its Australian aluminum refineries, and has made a $40 million pre-payment to secure the deal.

If sufficient production can be achieved, a new liquefied natural gas (LNG) export facility will be built in the Pibara.

Unconventional gas sources, such as those found in the Canning Basin, can be extracted by several drilling techniques. One such controversial technique, called hydraulic fracturing, or "fracking," involves fracturing rock formations and pumping large quantities of water into the well in order to liberate gas trapped in the rock formation. The process has been used extensively throughout the U.S. Some claim that fracking operations have been linked to contamination (in water supplies) and a variety of health risks.

Buru itself is not without its critics. Work was stopped recently at the Ungani oil project after traditional land owners said it had destroyed an Aboriginal archaeological site of significant importance that is about 100 km east of Broome.

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