Australia Shale Hunters Focus on Oil

From The Globe and Mail

By Rebekah Kebede

Shale prospectors in Australia’s vast Outback are homing in on oil as the lucrative prize that is easier and cheaper to exploit than gas.

Initial hopes had been to replicate a U.S. shale gas boom, but the economics of targeting oil rather than gas derived from shale formations, once considered a mere by-product, look increasingly compelling in Australia.

Natural gas, with no large domestic customer base, needs costly pipelines and plants to chill the fuel for export. In contrast, oil can be trucked to rail lines and ports, so is potentially more immediately profitable, and large finds could reverse more than a decade of declining Australian output.

Australia also already has sufficient conventional and coal seam gas reserves to feed enough liquefied natural gas projects to make it the biggest LNG exporter by the end of the decade, so a U.S. shale gas boom that has freed up abundant, previously unrecoverable reserves and brought prices down 40 per cent since November, 2008, looks a less attractive development model.

“Oil is easy,” said Peter Bond, the managing director of Linc Energy, which recently said it could be sitting on resources that could rival the Bakken shale, one of the main drivers of the United States’ surge in oil production.

“It’s $5 to $6 per barrel to get it to a road train from where you are to a port, with a $100 plus price per barrel of oil, that’s not hard to do.”

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