2nd UPDATE: Beach Energy Closes Australia Shale Gas Data Room

Beach Energy Ltd. (BPT.AU) has closed a data room for parties eyeing its shale gas assets in central Australia and doesn't expect to attract a partner until it proves up more gas, Chairman Bob Kennedy said Tuesday.

"We did have one open for a while and then it's closed. It was too early stage, I guess," Mr. Kennedy told Dow Jones Newswires on the sidelines of a conference. Shares in the company closed down 10% at A$1.145.

Adelaide-based Beach is potentially sitting on vast reserves of shale gas in the Cooper Basin, an area the size of Mississippi that straddles the borders of Queensland and South Australia states. Shale gas is already popular in the U.S., but hasn't taken off in Australia because there are abundant sources of cheap conventional natural gas and a lack of the large "fracking" crews required to drill for shale gas.

Beach is hoping that the environmental benefits of burning gas instead of coal, and export demand from Asia, will push up domestic prices enough to support the commercial development of its assets by 2015. Speculation is also mounting that shale gas in the Cooper Basin could support four massive gas-export terminals planned for Queensland state if they fall short of gas.

"We will be the swing producer, there's no doubt about that," Mr. Kennedy said. "So, anyone who's looking for gas, we'll have it."

Beach has embarked on a drilling campaign to test the characteristics of its resource, such as shale thickness and gas flow rates. It's drilled three exploration wells that Mr. Kennedy said have presented promising, but early-stage results.

"There was interest and there will be people who'll look at it once the results are there, which is the pattern in the U.S.," Mr. Kennedy said. "When it's all proven up they'll come along and want to play."

Later on Tuesday after the market closed, Beach said in a statement to the Australian Securities Exchange that it received unsolicited approaches regarding its shale gas assets early in 2011, and subsequently terminated discussions with the interested parties.

"Beach continues to receive unsolicited approaches in relation to its unconventional assets. Beach has recently, in the course of business, entered into confidential discussions with certain parties in relation to various assets in its unconventional portfolio," the company said.

Beach is one of a host of companies with shale gas assets in the Cooper Basin, including Senex Energy Ltd. (SXY.AU), DrillSearch Ltd. (DLS.AU), Cooper Energy Ltd. (COE.AU) and Strike Energy Ltd. (STX.AU).

"I think you'll see some consolidation at that level. A couple of those (companies) could get together pretty easily," Mr. Kennedy said.

U.K.-based BG Group PLC (BG.LN) this year bought a minority interest in DrillSearch, but recently sold its minority investment in Senex.

Recent deals in Australia's shale gas sector have associated committed work programs worth around US$600 million, said Andrew McManus, Wood Mackenzie's Vice President of Australasia Energy Consulting.

McManus said shale gas developments could add to the longevity of supply from Australia and help existing production from the next decade.

"However, preliminary analysis suggests that as a result of the challenges, Australia shale gas will come at a higher cost of supply than coal seam gas, with gas prices required in the range of A$6-A$9 per gigajoule to be economic," he said.

-By Ross Kelly, Dow Jones Newswires; 612-8272-4692; [e-mail]

--David Winning contributed to this report