Australia-based iron ore company Fortescue Metals is planning to invest $14m in shale gas exploration, in the onshore Canning Basin of Western Australia.
The company is making moves to acquire an 18% stake in Melbourne’s junior Oil Basins (OBL), which is expected to provide a cheap source of oil and gas to help fuel its plans of doubling its iron ore production, reports The Australian.
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A Fortescue spokeswoman told The Australian that the company is using huge amount of diesel and natural gas for its present operations, which are prompting them to consider long-term energy requirements.
"If we do finalise an agreement with Oil Basins, this modest investment would form part of this strategy," a spokeswoman said.
"While the potential gas resources are still to be proven in the Canning Basin, it is adjacent to the Pilbara and could potentially be a source of low-cost energy for our existing operations."
If the stake acquisition realises, Fortescue will purchase 120m shares in OBL, with an option to be issued up to 146m options, exercisable at 3.5c per share.
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By GlobalDataThe deal will also fetch the iron ore producer up to 25% stake in the shale gas ground near the Kimberley town of Derby against exploration work worth $10m.
The fund from the deal will support OBL to develop its Canning Basin, where it owns 50% application rights for the Derby Block exploration tenement.
OBL’s main sites for exploration and development of oil and gas include offshore Gippsland basin, Victoria; the onshore Canning basin of Western Australia and the offshore Carnarvon basin in Western Australia.
