“It’s move over Olympic Dam with a massive shale oil find confirmed for Linc Energy in South Australia, which sent its share price into orbit,” the ABC’s The Business said on January 29, exulting at a big discovery of unconventional oil and gas near the remote town of Coober Pedy, 800 kilometres north-west of Adelaide.
Brisbane-based Linc Energy released two consultant reports on January 23 on the oil and gas potential of its exploration licenses in the still-untapped Arckaringa Basin.
The quantity of “oil equivalent” potentially present was estimated to be up to 233 billion barrels. The Adelaide Advertiser said the next day the resource was “big enough to fuel Australia”, and calculated its value at $20 trillion — about 14 years of the country’s gross domestic product.
Linc CEO Peter Bond played down the Advertiser’s figure, but gushed nonetheless: “It is massive, it is just huge … If you stress test it right down and you only took the very sweetest spots in the absolutely known areas and you do nothing else, it is about 3.5 billion [barrels] and that’s sort of a worst-case scenario.”
Tom Koutsantonis, South Australia’s Mineral Resources and Energy Minister, was not to be left out. “Shale gas and shale oil will be a key part to securing Australia’s energy security now and into the future … Investment in unconventional liquid projects in South Australia will accelerate.”
On the need to quickly wind down extraction and use of all fossil fuels, including oil and gas, if climate disaster is to be avoided — not a word, from any of them.
What Linc has found
So what does Linc have in the Arckaringa Basin? Should most Australians — who don’t hold shares in Bond’s firm — be rejoicing?
Images of oil spewing wildly from drill-holes, in the manner of Texas in the 1920s, are out of place in the Arckaringa Basin. The three geological formations investigated in the firm’s limited initial drilling program contain hydrocarbon-bearing shales. These are relatively impervious rocks from which oil and gas, even if present, do not flow readily.
Typically, such shales contain kerogen, a solid, waxy “oil precursor”. Before oil and gas can be extracted, the shales need to be subjected to extensive hydraulic fracturing, also known as “fracking”. This involves forcing a mixture of water, sand and various chemicals via a drill-hole into the rock strata, at extreme pressures, to open cracks and fissures in the rocks.
With most shale deposits, the strata also need to be heated to high temperatures before liquids will flow. But in some cases, oil is present in liquid form (often along with gas), and fracking alone is enough to release it. Linc and its consultants believe that in the firm’s Arckaringa leases, key geological structures are of this type.
A better term than the commonly used “shale oil” for such unconventional liquid hydrocarbons is “tight oil”. Since the 1990s, extracting tight oil from shale has become a highly developed technology. Wells are angled to follow the shale seams. The drill-holes are often horizontal, and may extend for kilometres.
“Liquids-rich shale play”
Linc’s carefully worded January 23 statement describes the formations investigated in its drilling program as “rich in oil and gas prone kerogen that may form the basis of a new liquids-rich shale play.”
In technical terms, there is no certainty yet that large quantities of oil and gas will be extracted. But Linc’s exploration-licensed areas in the basin are vast — bigger than the Netherlands — and the known geology gives the firm obvious confidence.
Linc said the formations already studied “have excellent resource play potential with total organic carbon (TOC) levels, permeability, porosity and thickness that compare favourably to prolific US unconventional liquids plays such as the Bakken and Eagle Ford.”
The US fields, in North Dakota and Texas respectively, have been central to the recent revival of US oil output.
Resource company statements have an obvious bearing on share prices, and are required by law to have a very sound scientific and engineering basis. The fact that Bond and fellow directors are prepared to make comparisons with the Bakken and Eagle Ford fields means they see huge flows of tight oil and shale gas — at least 3.5 billion barrels of oil equivalent, and perhaps many times that — as near-certain.
If the split between liquids and gas in the “oil equivalent” is 50:50 — a reasonable guess — that would put the minimum new reserve of oil at about five years of Australia’s current consumption, but possibly many times more.
Bond’s delight is not surprising. But again, should the rest of us be joining in?
A further cause of Linc’s jubilation — to add to the likely size of the reserves — was not widely reported, but was let slip by a commodities journalist: “The clincher, says Linc, is that the area has no environmental baggage — it’s in the middle of nowhere.”
Local Aboriginal people might dispute that they have lived for thousands of years in “the middle of nowhere”. But it’s true that Linc does not face some of the main hurdles that have confronted fossil fuel exploitation elsewhere.
There will be no “Lock the Gate” style farmers’ protests in the Arckaringa Basin, because there are no farmers. Most of the area is under pastoral leases. In the arid conditions, returns from grazing are low, and whoever develops the oil and gas will have the money to make offers to the graziers that would be hard to refuse.
The area is not part of the Great Artesian Basin, which is to the advantage of the oil and gas developers, since fracking has a bad record of contaminating groundwater. The water from bores in the Arckaringa Basin is too saline for agriculture, and in many areas even for sheep. State governments, with an eye to tax revenues, are unlikely to care much if leakage of fracking fluids leaves the aquifers carcinogenic.
But the potential for environmental damage from extracting oil from the Arckaringa Basin extends far beyond the issue of the groundwater. The key problem lies with the unquantified, but clearly large, “climate footprint” that exploiting the basin’s shales can be expected to have.
The wells that extract tight oil from shale deposits are exhausted quickly; in the Bakken formation in the US, the yield from the average well falls by 69% after the first year, and ceases almost completely after five. This means that huge numbers of wells must be drilled, and fracked repeatedly while in operation. It is one of the reasons why tight oil is not cheap.
Along with the oil, most of the wells in the Arckaringa Basin are likely to yield substantial amounts of natural gas. During drilling operations gas is routinely vented, and further large releases occur during fracking.
The gas involved can be collected and used, but if the Bakken and Eagle Ford fields are any guide, this will rarely be done in the Arckaringa Basin. With the focus on the more valuable oil, there will be a reluctance to spend money on gas-related infrastructure. And with short-lived wells needing to be drilled at a frenetic pace, there will be little inclination to hold operations up until gas pipelines are ready.
Two years ago, the US Energy Information Administration said: “Due to insufficient natural gas pipeline capacity and processing facilities in the Bakken shale region, over 35 per cent of North Dakota’s natural gas production so far in 2011 has been flared or otherwise not marketed.”
When natural gas is “flared”, it is burnt off to prevent methane, its main constituent, from accumulating near ground level and creating the risk of explosions. The combustion products of flaring include large amounts of carbon dioxide, which traps heat in the atmosphere and is the key factor in global warming.
Probably more damaging in warming terms, though, are the quantities of gas that are not flared but that reach the atmosphere as methane. Methane is a potent greenhouse gas, many times worse than carbon dioxide.
When oil and gas wells are fracked, there is a possibility of opening up rock fissures that allow large quantities of methane to leak directly to the atmosphere, missing the drill-holes entirely.
These leaks may be a factor in the astonishingly high readings of methane recorded in recent years above several mainly conventional oil and gas fields in the US.
How will this experience of leaks through rock and soil translate to the Arckaringa Basin, where the fracking is to occur along kilometres of horizontal drill-holes?
When scientists eventually plot the methane concentrations above the new Arckaringa oil and gas field and compute the volume of the releases responsible, the picture is unlikely to be pretty. Arckaringa oil can be expected to have a dramatically bigger “carbon footprint” than the conventional product from areas like the Bass Strait.
Alternatively, events could follow a quite different path. Reason could prevail over profit-lust. Angry citizens could mobilise and force the climate vandals, and the governments that support them, to desist. The billions being lined up for investment in prospects like the Arckaringa Basin could instead go to fund a rapid roll-out of renewable energy.
Human civilisation, and the narrow envelope of climate and environment within which it developed, could turn out to have a future after all.