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Page added on January 25, 2013

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Australia to rival Saudi Arabia in oil reserves?

Australia to rival Saudi Arabia in oil reserves? thumbnail

An Australian company claims it has found an untapped shale oil field with estimated reserves that could potentially put the country next to remarkably oil-rich Saudi Arabia. Still, extracting the discovered treasure poses a huge technical challenge.

­Brisbane-based company Linc Energy has presented two estimates by respected independent consultants claiming that drilling and seismic exploration they do in South Australia has brought the prize they have been dreaming of for years – a potentially huge untapped shale oil deposit.

DeGolyer and MacNaughton petroleum industry consulting firm evaluated potential shale oil reserves at Arckaringa Basin around the town of Coober Pedy at 103 billion barrels of oil equivalent (BOE), while Gustavson Associates consulting firm put it as high as 233 billion BOE. That is practically comparable to the proven 263 billion barrel reserves of oil heavyweight Saudi Arabia.

The risked mean estimate given by DeGolyer and MacNaughton put it at a much more moderate 3.5 billion BOE.

“We didn’t expect it to go this nuts,” Linc Energy chief executive Peter Bond told Reuters.

With the current international market oil prices this shale oil could be worth billions of dollars by the most conservative estimate.

“How much is recoverable is always the question. Is it 3 billion barrels or is it 203 billion barrels? Even if it’s 3 or 4 billion barrels… that’s a massive find in this part of the world. No matter how you cut it, it’s still a massive outcome,” Bond said.

In any case, Arckaringa Basin might contain more oil than all of the known Australian oilfields combined, finally making the country fully energy independent.

Though Linc Energy’s shares jumped up immediately after Australian media broadcast the news, using “trillions of dollars” and other superlative degree terms, the company still needs hundreds of millions of dollars just to finish exploration, let alone extracting the black gold commercially. The most important issue now is how much of the discovered oil is recoverable.

Linc Energy, which has already spent about AU$130 million (US$136 million) drilling in the Arckaringa Basin, has hired Barclays Bank to search for a partner to invest AU$150-$300 million into the next stage of the project.

Shale oil of the Arckaringa Basin is hidden beneath serious 1-2km of shale rock, but there is still some good news. Usually, oil is extracted from shale by traditional mining, when shale is crushed and organic matter in it is heated to create liquid oil. At Arckaringa basin engineers found oil in droplets, which means it is already liquid and can be extracted by the modern fracking process.

Unlike in the US, where fracking is widespread and has a tendency to become cheaper, in Australia the costs could be many times higher. If drilling a shale well in America has an average cost of around US$10 million, in Australia it might well reach $15 million per well.

The fracking process by itself has always been raising concerns of environmentalists in the US, where it is widely used to extract shale gas, and also in Europe, because chemicals used in this process seriously pollute groundwater. But for Arckaringa Basin, situated in a practically unpopulated area of the land Down Under, fracking shale oil may pose fewer risks.


14 Comments on "Australia to rival Saudi Arabia in oil reserves?"

  1. BillT on Fri, 25th Jan 2013 4:15 am 

    Destruction of the ecosystem by any other name is still destruction…

  2. keith on Fri, 25th Jan 2013 4:59 am 

    Can anyone say: Investor money

  3. DC on Fri, 25th Jan 2013 6:30 am 

    Does this sound a lot like the US is about to become ‘energy independent’, Australian edition to anyone?

  4. Arthur on Fri, 25th Jan 2013 7:34 am 

    Meanwhile another breakthrough in solar cells:

    8 cent/kwh

    If there is one territory suitable for this technology, it is Australia. Sooner or later, this is going to happen anyway. Don’t poison the well and make it sooner.

  5. Kenz300 on Fri, 25th Jan 2013 3:37 pm 

    Climate Change is real.

    The price of oil, coal and nuclear keep rising and causing environmental damage.

    The price of safe, clean wind and solar keep dropping.

    Easy Choice.

  6. mark on Fri, 25th Jan 2013 4:46 pm 

    Not another Saudi Arabia…they’re popping up all over the place!!
    Modern fracking process..Where’s the water sport?

  7. Kenz300 on Fri, 25th Jan 2013 6:35 pm 

    Seems like between the hot climate and lack of water resources that Solar power would be the best option for Australia.

  8. Newfie on Fri, 25th Jan 2013 6:38 pm 

    Global warming is already frying Australia to a crisp. Another 100 billion barrels of oil to burn is just what they need. LOL!

  9. Hubbertsfreak on Fri, 25th Jan 2013 8:32 pm 

    An investor talking his book. Shale is far, far inferior to conventional drilling. I believe it was Kunstler that said shale is like squeezing a sponge compared to a fire hose (conventional drilling). The EROEI just isn’t there. Not to mention 260 Billion barrels of oil only powers the world for about 8.5 years at 84 million barrels a day.

  10. John Orr on Fri, 25th Jan 2013 10:10 pm 

    Great article Arthur….another reinforcement of people & companies not sitting on their ass waiting for doom!

  11. BillT on Sat, 26th Jan 2013 2:36 am 

    No, another example of dreamers in denial…not going to happen.

  12. Amvet on Sat, 26th Jan 2013 6:35 pm 

    Oil produced from fracking shale can be very profitable for the oil companies, but does not change the world.

    Look at some data from the Bakken Shale in North Dakota. Whiting Petrolium Corp. annual report:

    First year production decline 68% to 70%
    Production decline during the first five years 89% to 91%.

    Not a good foundation for long range planning.

  13. John Orr on Sat, 26th Jan 2013 10:03 pm 

    Billit….. Nothings going to happen with you, you fossil…..not even forth a capital t!

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