Reality check needed on oil claims

ANALYSIS: Plans for oil exploration in the Canning Basin announced over the weekend may deliver good news for Western Australia, but some of the claims surrounding the latest drilling program are extravagant to say the least.

Resources Minister Matt Canavan and his WA counterpart Bill Johnston announced yesterday that a single ‘stratigraphic’ well is to be drilled in the Canning Basin later this year.

The federal government has provided $5 million in funding, with the Geological Survey of Western Australia managing the operation.

In other words, it’s a small amount of money for early-stage exploration; in fact, 'stratigraphic' means it is being drilled for the purpose of gathering information, with no intent to produce oil or gas.

As Senator Canavan correctly stated, the Waukarlycarly project is frontier science because the drill hole is well outside areas previously explored.

Similarly, Mr Johnston said the well was designed to better understand the region and provide tangible evidence that would help boost investment.

Despite this, Western Australians were greeted with a front page headline this morning stating there was a potential jobs bonanza from the oil project.

It quoted Senator Canavan saying the project could be a game changer for WA and “create another boom the likes of which we have seen in iron ore and gas”.

Under the misleading headline 'WA Strikes Oil', Senator Canavan said the project could create hundreds of thousands of jobs “if this is as large as our geologists expect”.

He also suggested it could create a manufacturing boom, similar to what the US experienced after developing its shale gas deposits.

What’s the reality?

US shale gas is mostly located near to existing infrastructure, including a national network of gas pipelines, large population centres and existing industry. That’s why it was easily developed and had such a big impact.

The WA drilling is located in the Waukarlycarly Embayment, in WA’s far north and hundreds of kilometres inland near the Telfer gold mine.

The remote location, lack of infrastructure and harsh environment explains why there has been so little exploration in the Canning Basin, despite its potential.

But assuming a commercial oil field is eventually discovered and goes into production, how many jobs would it create?

Woodside Petroleum is WA’s biggest oil and gas producer and its total staff numbers are just more than 3,500.

Saudi Aramco, the world’s biggest oil producer, has 65,000 employees. Does Senator Canavan really think WA could exceed that number?

The potential in the Canning Basin is based on survey work by Geoscience Australia.

It has estimated there are potentially 43 billion barrels of recoverable shale oil in the Canning Basin. To put that figure into context, annual global production is 29 billion barrels.

Additionally, there are estimated recoverable shale gas resources of 390 trillion cubic feet with additional potential for tight gas resources of 48.5 trillion cubic feet. 

This is not the first time the Canning Basin has been identified as a potential bonanza for WA.

In November 2012, then premier Colin Barnett announced a state agreement with Mitsubishi Corporation and Buru Energy to support development of gas fields in the Caning Basin.

The agreement envisaged construction of a gas pipeline to the Pilbara, with Mr Barnett saying it would secure WA’s future energy supply.

There were even suggestions the Canning Basin could supply an export-focused LNG project.

Five years later, the state agreement was terminated after the joint venture failed to progress its plans.

As well as being misleading, today’s front page headline in The West Australian was based on old news.

The state government announced one month ago, on September 10, that it had begun drilling the stratigraphic well.

Department of Mines Industry Regulation and Safety executive director (geological survey and resource strategy), Jeff Haworth, said the drilling was being carried out on an existing cleared area next to the Marble Bar-Telfer Road.

“Drilling began on September 1 and the well is planned to reach a total depth of around 2,200 metres,” Mr Haworth said.

“It will provide a much better understanding of the little-known subsurface geology of this region and will also provide a test of geological interpretations made from the Kidson (seismic) survey.”

If the drilling produces positive results, and if it is followed up by further commercial drilling, then we may have a much more substantial understanding of the Canning Basin's potential.