Arkaringa has been known about for decades. Lots of companies have drilled holes, mainly mineral exploration holes looking for copper gold and uranium.
I have spoken to a number of petroleum engineers about Arkaringa and a geologist who had a stake in it many, many years ago.
When the shale boom was just beginning in the US a number of venture capitalists were looking for projects in Australia, a number of people from overseas approached me on this. I immediately thought Arkaringa! These venture capitalists were pretty damn clever and had a lot of technical expertise behind them.
SAPEX had already beaten them to it, and were in the early stages of proceeding to a float.
Some of the venture capitalists wanted to buy out SAPEX.
Core information from old drill holes is available through PIRSA.
What were their thoughts on Arkaringa? They thought it was questionable..
The resource was there, but it was too shallow. (see the differences in depth between Arkaringa and the Bakken Shale). For gas, the pressure just wasn't there increasing the cost of production.
For Oil, the lack of gas pressure would increase pumping costs. The remoteness, lack of infrastructure, would also raise costs significantly. Water shortages for fracture stimulation another drawback.
Transport of the crude oil is another major cost. I believe the Crude Oil would need to get to Geelong. Stony Point in SA is a condensate refinery for Moomba. Port Stanvac in Adelaide was closed a number of years ago. That could add another $30-40 per barrel from out that way. Petrol is $2 a litre at Oodnadatta.
Much of the area is also inside the Woomera restriced zone, and is heavily controlled by the aboriginals too. Not that I think either of those things will be a show stopper, but it will add cost and timeframes. There is stuff all infrastructure.
Another major problem with the shallow depth was that the oil was too young. Lack of thermal maturity.
At the end of the day these clever people moved on looking for better prospects in other countries.
The cost of taking out SAPEX was too high for them, and they thought that Arkaringa was marginal, with a big question mark at best.
There is oil and gas there. But the cost of extraction is high.
My personal feelings is that it may prove to be uneconomic at this time, despite the major advances in technology.
It will however need more wells and work to prove it. and one day when oil is $300 a barrel it will be economic.
Other than the massive resource potential many of the fundamentals are not that great and need further work.
LNC Price at posting:
$2.41 Sentiment: None Disclosure: Not Held
