Black Gold in Australia

On January 23rd Linc Energy (ASX: LNC) announced that they have two independent reports showing that oil, black gold, has been discovered in the Arckaringa Basin in Australia.  These oil reserves are located in the the Pre-Permian, Stuart Range, and Boorthanna.  One report by Gustavson estimates that 233 billion barrels of oil equivalent are in the reservoirs while DeGolyer and MacNaughton estimate 103 billion barrels are there.  This could be a game changer in the oil industry.

Linc Energy owns 16 million acres in the area and believes that 2-3 million acres have the majority of these reserves.  Some independent reports have estimated that the oil discovery could be worth $20 trillion for South Australia.  Linc will not confirm this number stating that it is too early to put an exact value on the discovery.  For those watching the market there is clear potential to benefit from this discovery as Linc is a publicly traded company.

Reports show that the Stuart Range formation has significant oil and gas prone kerogen. These reports confirm Linc Energy’s view that the Arckaringa Basin is rich in resources which can be compared with US unconventional liquids plays such as the Bakken. Those in the US can point to the massive economic impact accessing those reserves had on the economy with sleepy states like North Dakota becoming boom towns with more people moving there than housing and ammenities to support them.  This Australian discovery will not only generate massive revenue for Linc, position Australia for oil independence but also positively impact the Australian economy.

In addition to identifying the potential reserves D&M also evaluated the likelihood of geological success.  With a positive report in hand Linc Energy is looking to Barclays Bank to provide them with strategic guidance and help them secure a JV partner that is experienced in shale operations.  They are estimated to need an additional $150 – $300 million for the next stagge of the project.  Linc CEO, Peter Bond, was quoted as saying  ‘Linc Energy is committed to delivering the best outcome for the development of this acreage and maximising value to shareholders. The best way for Linc Energy to do that is to bring in an industry expert with the know-how and funding to drive this asset forward to production as promptly and as efficiently as possible.’
Linc is not inclined to agree with the $20 trillion estimate for oil production but even their worst case scenario yields 3.5 billion BOE.  This will be a boom for the Australian economy and has the ability to make them oil independent.  If the reports are accurate Australie could become the worlds next major exporter of oil.  Shares of Linc were trading at $2.82 so investors wanting to participate still can, at a low price.

Green energy has become a popular investment over the past decade with just as much failure as success.  Oil on the other hand is still a very tangible commodity, required by the modern world to operate factories and cars.  As the economy improves oil demands will rise and the Australian discovery could be just in time.

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