Upstream player ConocoPhillips (COP) is looking to start the exploration of shale reserves in Australia. The company has partnered with a local player New Standard Energy to target shale assets in Western and Central Australia.

Conoco has announced its interest in developing gas resources for the international markets after cutting shale exploration in the U.S. in light of low natural gas prices.

Energy companies like Conoco and Chevron (CVX) are developing major liquefied natural gas (LNG) facilities in Australia to cater to the fast-growing demand from Asian economies. Gas produced from the shale deposits could be an input for the LNG plants so that it can be shipped to markets such as Japan and China.

International push

Low gas prices in the U.S. have forced Conoco to announce cuts in its plans to develop shale assets in the U.S. The company is focusing on developing liquids rich reserves and is also targeting the international LNG market where gas prices are linked to oil benchmarks. After the spin-off of its downstream assets, Conoco is redoubling efforts to boost falling output levels. The exploration of shale assets in Australia will allow the company to export much of the expertise it has acquired in shale exploration activity in the U.S. to international locations as well as target the lucrative gas demand from Asia.

According to company executives, Conoco is presently pursuing multiple options in the Australia. Its partnership with New Standard gives it access to a large acreage in Central and Western Australia. In particular, Conoco is pursuing options to explore the Canning Basin and the Cooper Basin. A number of companies are currently interested in financing the initial shale exploration in Australia, including Conoco, Hess Corp and the BG Group.

Shale exploration is a technically intensive process and has met with local opposition in some European countries because of concerns related to the impact on local ecology. If exploration efforts in Australia are successful and are found economically feasible, the initiative could boost Conoco's gas output in the medium-to-long term.

Trefis is revising its model for ConocoPhillips in light of the recent changes to its structure.

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