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Australian shale oil discovery could be larger than oilsands

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Australian shale oil discovery could be larger than oilsands

Postby oneh2obabe » Jan 25th, 2013, 5:46 am

Linc Energy claims to have found rock formations containing more than $20 trillion worth of oil
Australian Broadcasting Corporation
Posted: Jan 24, 2013 1:06 PM ET
Last Updated: Jan 24, 2013 3:23 PM ET

Brisbane company Linc Energy says independent studies have confirmed a major shale oil source in South Australia's far north, which officials have estimated could be worth $20 trillion.

The company says U.S. consultants have carried out drilling and geological and seismic surveys around Coober Pedy. Linc Energy holds rights over more than 65,000 square kilometres of land in the Arckaringa Basin and started explorations in 2008.

In a statement to the Stock Exchange, the company said reports from U.S.-based consultants indicate underlying rock formations "are rich in oil and gas-prone kerogen".

The company says up to 233 billion barrels of oil are estimated to be trapped in the shale. Chief executive Peter Bond says even if the amount of retrievable oil is well below that, the discovery is still "bigger than the Cooper Basin and Bass Strait combined".

"If you stress test it right down and you only took the very sweetest spots in the absolute known areas and you do nothing else, it's about 3.5 billion [barrels] and that's sort of worse-case scenario," he said. "So if you took the 233 billion, well, you're talking Saudi Arabia numbers. It's massive, it's just huge."

By way of comparison, the Athabasca oilsands in Northern Alberta contain almost 170 billion barrels of proven or probable reserves.

"We've also spent a lot of time with our own geologists and external geologists trying to unlock what's the best option there. "What it could do is really turn this thing into the next boom, so where you saw coal-bed methane transform Queensland and the gas industry, shale could and I think will transform South Australia and a potential oil boom."

But Bond says it could cost up to $300 million to prepare the site for production.

"We've got something in excess of a billion-dollar market cap … but the issue here isn't just capital. It's the expertise to unlock the acreage as well," he said. "We will seek a partner to both fund that and work with us from a technical perspective and that could be anybody.

"It could be a major oil company, it could be one of the major operators in shale, it could be one of the larger overseas oil groups."

Bond says the discovery has the potential to bolster the nation's energy security. "We are importing more and more oil every day. Australia was relatively self-sufficient in oil in 2000, 2001, but since then we've been falling off the peak oil curve for quite a while now," he said.

"Australia currently consumes just under a million barrels of oil a day of which we are probably producing something less than half that or around half that depending on the numbers you read," he said.

"You'd have to get up over 500,000 barrels a day to put yourself into a net energy export position which would be significant.

"Any oil field that can do 500,000 barrels a day is massive in anyone's books. It would be a push to get to that high. That would basically be getting out to full production. It's hit all the runs and done all the right things to get up to that size but if it does, you potentially would be getting up around being an oil exporter," Bond said.

"By then much of your other oil production in Australia would have dropped off even more and you'll be just starting to fill the gaps there."


Shale oil is more costly to extract and more controversial than conventional crude and involves fracking, in which water is pumped in to break up the shale.

South Australian Mining Minister Tom Koutsantonis says it is much too early to say if the reserve can be profitably tapped. "What they think they've found, or they have found, but whether it's economic to recover or not is still the question, is vast reserves of shale oil," he said.

"It's basically oil which is trapped in low-permeability, clay-rich rocks so it's within the rocks and you fracture-stimulate those rocks to release the oil. "There are processes now where you can unconventionally retrieve these reservesm" he said."

"If the reserves and the pressure was right over millions of years and the rocks have done the things they think they've done, they think they can extract vast reserves of oil out of South Australia which would have a value of about $20 trillion."

"South Australia is blessed with abundant resources but there are a few setbacks and those setbacks are that they're remote and they're deep" Koutsantonis said.

But the discovery is not another example of 'pie in the sky' dreams such as when BHP Billiton cancelled its Olympic Dam expansion in the state's north last year, he promises.


"All these things are luck and risk. I think what we're seeing up there is a very, very big deposit. There's more drilling to be done. If it comes off, it will certainly be a very significant amount of oil reserves."

John Young, a senior resources analyst at Wilson HTM, says it is important to take these preliminary figures with a grain of salt. "I think we need to recognise these represent, at this point in time, what people believe to be there and what might be able to be recovered, but we've still got some significant way to go before people have actually commercially recovered resources out of these shales," he observed.

He says it is still to early to fully assess the quality of the resource, and how much is extractable at a commercially competitive cost. "I think it's unwise to hang one's hat too much on the size of the numbers," he added.

"The numbers are going to be very large, but we really need to move from that in terms of this focus around the quantity to ultimately one of the quality of the resource — how good is it, how economic will it be, and that's going to take a significant amount of exploration and appraisal work before the industry's in a position to determine that."

http://www.cbc.ca/news/business/story/2 ... e-oil.html
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Re: Australian shale oil discovery could be larger than oils

Postby Static » Jan 25th, 2013, 9:39 am

Shale is abundant all over the world. We will not run out of oil and natural gas for over 100 years.
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Re: Australian shale oil discovery could be larger than oils

Postby hobbyguy » Feb 26th, 2013, 6:52 pm

Reading some about the rapid depletion of wells in the Bakken shale http://www.theoildrum.com/node/9748 I wouldn't get too excited about this.
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Re: Australian shale oil discovery could be larger than oils

Postby Static » Feb 26th, 2013, 9:23 pm

http://www.aei-ideas.org/2013/01/bakken-oil-boom-in-north-dakota-might-last-for-100-years/#mbl.


China. Europe, and Russia also have an abundant source of shale reserves. My great-great grand children will not see peak oil.
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Re: Australian shale oil discovery could be larger than oils

Postby Static » Feb 27th, 2013, 10:36 am

hobbyguy wrote:Reading some about the rapid depletion of wells in the Bakken shale http://www.theoildrum.com/node/9748 I wouldn't get too excited about this.


My understanding is that due to technological advancements in fracking that the reserves increase substantially.
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Re: Australian shale oil discovery could be larger than oils

Postby hobbyguy » Feb 27th, 2013, 10:55 am

If you look at the article I referred to, the issue with shale oil is essentially one of cost. If your cost of production is $85/barrel, then you want to see $100/barrel as your base price to justify the risky investment. Probably more like $120 to make it really attractive.

The articles I read about the Bakken shale oil (the production of which has huge ramifications for Canada's fossil fuel industry) indicate that current market prices don't support the shale oil very well. If, and I don't have the expertise to judge, the "Red Queen" article is correct, then there are not enough drill rigs operating to maintain the Bakken production, as well yields drop very quickly.

So I have to agree that "peak oil" production may not yet have been reached, but there is an argument for saying that "peak affordable oil" production has already passed us by.

http://climate.uvic.ca/people/ewiebe/gasoline_prices.php gives recent history.

If memory serves me correctly (questionable) when I first started driving (just after the invention of the wheel) the price of a liter of gasoline was about 5% of minimum wage. That would make it .51/liter today. IF you mandated that as the maximum selling price (I know, dumb idea) then virtually all "unconventional oil" production would be shut down.

Peak oil theory was proposed based on a foreseeable set of circumstances based on a technological skill set. What they got wrong was the technological skill set. But using that technological skill set has huge costs. So we have not seen total production decline, but we have seen "affordable" production decline.
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Re: Australian shale oil discovery could be larger than oils

Postby Rjamer » Feb 27th, 2013, 11:08 am

hobbyguy wrote:Reading some about the rapid depletion of wells in the Bakken shale http://www.theoildrum.com/node/9748 I wouldn't get too excited about this.

The Bakken formation was described to me as being like "ice" in SE Sask.. I was told that the fracking process cracks the "ice" which allows the fluide to flow out and the actual fractured area is only a meter or two on either side of the horizontal drill bore..Preferably you try run the drill bore right along the bottom of the formation which is 1 to 2 meters thick in my area.. I`ve read that there is estimated to be 1 million barrels of oil per quarter section or 160 acres,, the trick is to recover it.. .. The tech is getting more advanced all the time which will mean more will be recovered..
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Re: Australian shale oil discovery could be larger than oils

Postby hobbyguy » Feb 27th, 2013, 11:31 am

Even the optimistic article you referenced (thanks for that) admits that production from individual wells drops very rapidly.

The implication is that maintaining total field production depends on new wells coming in. If the number of new wells coming in produce less than the decline of the old wells, then the total field production drops. That is the essence of the "Red Queen" article. What surprised me was how rapidly the production drops off, and the low level that it drops to.

However, even after 12 years (after a drop of 85% in production in the first 3 years), the production is still roughly 8.5% of the initial production.

http://seekingalpha.com/article/909761-bakken-update-the-red-queen-is-just-a-fairy-tale-part-ii

This article seeking to refute the "Red Queen" article just seems to me to confirm that the Bakken will have declining production. It will still be a source for a long time, but will not produce at the very high levels currently experienced - if get the implications correctly.

Looking at Rjammers comments, I may be making the same mistake as the original proponents of "Peak Oil" - underestimating the capabilities and pace of technological improvement. Unfortunately, I don't have the expertise to even get a sense of what is possible and the cost implications.

No matter how I look at it though, shale oil, even with new drilling/fracking methods, is expensive oil.
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Re: Australian shale oil discovery could be larger than oils

Postby Rjamer » Feb 27th, 2013, 11:54 am

hobbyguy wrote:Even the optimistic article you referenced (thanks for that) admits that production from individual wells drops very rapidly.

The implication is that maintaining total field production depends on new wells coming in. If the number of new wells coming in produce less than the decline of the old wells, then the total field production drops. That is the essence of the "Red Queen" article. What surprised me was how rapidly the production drops off, and the low level that it drops to.

However, even after 12 years (after a drop of 85% in production in the first 3 years), the production is still roughly 8.5% of the initial production.

http://seekingalpha.com/article/909761-bakken-update-the-red-queen-is-just-a-fairy-tale-part-ii

This article seeking to refute the "Red Queen" article just seems to me to confirm that the Bakken will have declining production. It will still be a source for a long time, but will not produce at the very high levels currently experienced - if get the implications correctly.

Looking at Rjammers comments, I may be making the same mistake as the original proponents of "Peak Oil" - underestimating the capabilities and pace of technological improvement. Unfortunately, I don't have the expertise to even get a sense of what is possible and the cost implications.

No matter how I look at it though, shale oil, even with new drilling/fracking methods, is expensive oil.

The oil companies are allowed to drill 3 wells per quarter or 160 acres per formation,, mind you most horizontal wells are nearly a mile long with most of the production coming from the first half mile.. You might see 10 wells on one quarter but they would be in different formations.. Apparently they have discovered a big find in Calf. ,, Utah ( I think ) as well as Alaska.. It is also hi grade light oil as opposed to the oil sands stuff. I think each well costs about 1 million dollars to drill and complete but that was few years ago so not sure about now...
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Re: Australian shale oil discovery could be larger than oils

Postby hobbyguy » Feb 27th, 2013, 1:04 pm

That's an interesting point about it being high grade light. No upgrading costs and lower refining costs (?) might help get the premium they need.
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