US oil giant ConocoPhillips is poised to become the first global major to start looking for shale gas in Australia, signing a non-binding deal with New Standard Energy to spend up to $US110 million ($103m) on exploration in Western Australia.

The deal, announced yesterday, comes just a day after Beach Energy said it had significant gas flows from the nation's first shale gas well, drilled in South Australia. It also comes after US mid-tier oil company Hess earlier this year agreed to spend up to $US60m acquiring interests in and exploring the Beetaloo Basin in the Northern Territory.

In the past decade, new shale gas technologies, which include the controversial underground process of fracking to release gas from the rock it sits in, has turned a gas shortage in the US into a surplus.

It is unclear whether there is similar potential in Australia, and whether it is cost effective, given our comparative lack of pipeline infrastructure and lack of previous exploration drilling.

But the testing of the waters by two US oil companies is bound to spur interest in companies such as New Standard, Beach and AWE that have been early entrants into shale gas exploration permits. Conoco and New Standard have signed a heads of agreement to negotiate the US major taking up to a 75 per cent stake in New Standard's Goldwyer project on the northern edge of the Great Sandy Desert by funding up to $US109.5m of drilling and evaluation.

The pair are targeting a binding agreement by the end of September. If a binding agreement were struck, New Standard said it hoped exploration would begin next year.

Under the deal, Conoco will not immediately become the operator of the permits. Instead, it will fund Perth-based New Standard's drilling of exploration wells.

But the major has the right to become the operator whenever it pleases. It also has the right to pull out of the deal at various stages of exploration, leaving New Standard with the whole of Goldwyer, which stretches over 45,000 square kilometres of the onshore Canning Basin.

In an April report, the US Energy Information Agency said the Canning Basin could hold the most shale gas of Australia's onshore basins.

http://www.theaustralian.com.au/business/news/a-fracking-good-deal-on-aussie-shale-gas/story-e6frg906-1226094181189