The Arckaringa Basin Could Be The Largest Shale Oil Find of All Time: ConocoPhillips, Hess Corp., Statoil ASA
Kent Moors: Over the past few days, I have released information on what could be the largest shale oil find ever recorded.
It’s located in an area of Australia called the Arckaringa Basin and contains as much as 233 billion barrels (or more) of recoverable shale oil.
That’s more than all of the estimated oil in Iran, Iraq, Canada, or Venezuela. And it’s just 30 billion barrels shy of the estimated reserves in all of Saudi Arabia.
The discovery at the Arckaringa basin is so big it’s already prompting some observers to begin talking about energy independence for Australia, much in the same way Americans did after similar discoveries in the Bakken, Marcellus, Eagle Ford, and Utica basins.
And there is one small company that controls what is shaping up to be the biggest worldwide oil project to hit in decades.
The Opportunity in the Arckaringa Basin
It’s a company called Linc Energy (OTC: LNCGY).
That a company this small is in the driver’s seat in a find this big is one of the major new wrinkles in these mega-projects.
It used to be (and we are only talking about four or five years back), that the top international majors would be calling the shots on mega- billion dollar projects like this one.
But what’s happening in the Arckaringa Basin is occurring more frequently — especially in this part of the South Pacific.
Today, small cap companies are controlling access to some of the biggest shale projects on the planet, requiring the big boys to rethink their strategies.
These developments provide individual investors some major opportunities to buy into projects with small companies at low cost or ride in on the backs of the majors and oil field service producers coming in.
And if you learn the right way to invest, there is some serious money to be made down under.
Both shale/tight oil and shale gas have significantly changed the hydrocarbon production landscape. Until recently, the emphasis has been on North American production.
However, studies from the U.S. Geological Survey, the International Energy Agency, and even OPEC itself have all concluded shale oil and gas is prevalent elsewhere in the world.
And that has led to new targets for major development.
The Shale Oil Boom Continues Down Under
For example, a second event is unfolding just north of Australia, where another small company just happens to control access to a massive project. This one is in Papua New Guinea, and it has some of the largest international majors just drooling over the idea of being involved.
However, the parade of big companies seeking a piece of significant projects controlled by much smaller operators hardly ends there, especially in this part of the world.
Chevron (NYSE: CVX) once again made news early yesterday morning by announcing it had agreed to pay as much as $349 million to join Australian minnow Beach Energy (OTC: BCHEY) in two separate projects.
Both are shale gas plays – one in South Australia and the other in Queensland.
Now despite the huge projects Chevron already runs further west (the ones I know quite well from my work there), these two new concessions amount to the company’s first foray into Australian shale gas. These are Cooper basin developments, where several projects are into producing shale gas. Chevron is likely to take over controlling interest (as much as 60% in the first), while settling for a bit more than a third in the second.
Beach Energy is an Adelaide-based producer and does have depository receipts trading OTC in New York. However, the issue is that these shares have virtually no liquidity. No shares traded on Friday and the average number for the past three months is just 33 shares a day.
Therefore, there will be a likely big bounce in these shares, but there will be no way to control the rapid price rise and subsequent difficulty in exiting a position. Beach has greater liquidity on the Australian Securities Exchange, but trading on the ASX remains difficult for many non-Australian investors.
Nonetheless, the parade of internationals moving into Australian projects continues. Chevron joins the likes of U.S. companies ConocoPhillips (NYSE:COP) and Hess Corp. (NYSE:HES), Norwegian major Statoil ASA (NYSE:STO) and U.K.’s BG Group (OTC: BRGYY), a more liquid depository receipt opportunity.
To sweeten the pot, the Australian government has recently estimated there may be as much as 400 trillion cubic feet (11.3 trillion cubic meters) of shale gas in the country.
So don’t be surprised if there are more such announcements of more big projects controlled by small local companies coming in the near future.
As for the massive find in the Arkaringa Basin, the real investment play is with the companies coming in to provide the essential working capital for field development and to provide the essential field services to pull it all off.
Dr. Kent F. Moors is an internationally recognized expert in global risk management, oil/natural gas policy and finance, cross-border capital flows, emerging market economic and fiscal development, political, financial and market risk assessment. He is the executive managing partner of Risk Management Associates International LLP (RMAI), a full-service, global-management-consulting and executive training firm. Moors has been an advisor to the highest levels of the U.S., Russian, Kazakh, Bahamian, Iraqi and Kurdish governments, to the governors of several U.S. states, and to the premiers of two Canadian provinces. He’s served as a consultant to private companies, financial institutions and law firms in 25 countries and has appeared more than 1,400 times as a featured radio-and-television commentator in North America, Europe and Russia, appearing on ABC, BBC, Bloomberg TV, CBS, CNN, NBC, Russian RTV and regularly on Fox Business Network.
Moors is a contributing editor to the two current leading post-Soviet oil and natural gas publications (Russian Petroleum Investorand Caspian Investor), monthly digests in Middle Eastern and Eurasian market developments, as well as six previous analytical series targeting post-Soviet and emerging markets. He also directs WorldTrade Executive’s Russian and Caspian Basin Special Projects Division. The effort brings together specialists from North America, Europe, the former Soviet Union and Central Asia in an integrated electronic network allowing rapid response to global energy and financial developments.