(BRK.A), (BRK.B)
Anyone that follows Berkshire Hathaway knows that it is sitting on over $100 billion in cash. They also know about the company’s over $92 billion in insurance float. But there’s another huge asset that Berkshire is sitting on and hint, it’s not Bitcoin, Ethereum, Ripple, Litecoin, or any other cryptocurrency.
It’s something far more tangible, and as the old expression goes, “It’s as good as gold.” In this case it’s not gold, it’s natural gas.
Berkshire Hathaway Energy’s Australian subsidiary, CalEnergy Resources has the rights in Australia to what the company called a “significant gas field.”
How significant?
The gas field, which is located below the Whicher Range, is estimated to contain four trillion cubic feet of gas-in-place.
CalEnergy is the sole titleholder and operator of the exploration permit EP 408 located approximately 280 kilometers south of Perth, and covers both the Whicher Range and Wonnerup gas fields.
The Long, Very Slow History of the Whicher Range Gas Fields
The gas fields were first discovered in 1968 and 1971, respectively, and are located in ancient sandstone reservoirs nearly four kilometers underground.
The big problem since its discovery has been how to get the gas and not lose your shirt doing it.
According to CalEnergy, the field is a candidate for traditional drilling methods, and hydraulic fracking is not considered a viable option.
In 2016, Peter Youngs, the Managing Director of CalEnergy Resources Group, discussed with MazorsEdge the progress on the development of the gas field, noting that “the field represents a large in place gas resource, its characteristics are challenging and there is much work still remaining to move this resource to a commercially developable status.”
As for the initial test well, Youngs said at the time, “we are encouraged by the flow rates, as seen during the test, but that the critical commercial assessment (of the flow rates) is subject to a period of substantial subsurface data integration work (which is ongoing).
Youngs also doubted that the field could be commercialized by 2017, and that has proven true.
As to when the gas field could start to produce meaningful amounts of natural gas, it still looks to be years away.
CalEnergy recently requested and received, a variation to the permit work program from the Department of Mines and Petroleum (DMP) to undertake reservoir pressure monitoring – this involves data gauges being placed in the Whicher Range 1 (WR-1) and Whicher Range 4 (WR-4) wells.
The company is continuing with reservoir pressure monitoring, and is focused on enhancing their understanding of reservoir behavior.
In the interim, CalEnergy has launched a Care and Maintenance Environment Plan (CMEP) to maintain the current well sites and drilling pads.
Will patience be a virtue?
For fifty years, the gas fields of the Whicher Range have both held out the promise of enormous economic benefit, and the frustration of inaccessibility.
CalEnergy notes that in the past, “feasibility studies have failed to identify an economic technical strategy for the development of commercial gas production.”
The good news is that as a result of its tests, the company now believes that gas recovery is feasible, and Berkshire’s patience will pay eventually off.
© 2017 David Mazor
Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.