Australia: The next Saudi Arabia?

Is Australia poised to become the world's largest exporter of oil and gas?

Mike King

Mike King is a Fool.com.au Investment Analyst and Writer. He caught the investing bug more than a decade ago, at a time when the U.S. had invaded Iraq and fear reigned in the markets. His initial success as the markets took off encouraged his passion and thirst for knowledge. With 13 years behind him at one of Australia's largest domestic banks, Mike's passion for stocks led him to join a boutique funds management firm, where he stayed for four years. A seven-year stint in equity research at one of the largest investment banks in the world followed that, giving Mike a thirst to pursue his passion further. Mike holds a Diploma in Applied Finance and Investment and a Graduate Certificate in Financial Planning. His passion is to help retail investors invest better, and that passion was one of his primary reasons for joining The Motley Fool Australia in late 2011. Mike has written thousands of articles since joining, including for Fairfax Media, Yahoo!7, Ninemsn and has also appeared on ABC's The Business. You can see all of Mikes' holdings here

Published July 23, 2013 11:46 am AEST

Australia survived the global financial crisis, which began in 2008, very nicely, thanks to our massive resources exports.

That now appears to be tapering off as our biggest export customer, China, moves from an industrialising nation to a consumer-focused economy, and demand for natural resource material slows.

But we could be on the verge of another boom. This time it's oil and gas, as global demand for energy, especially in emerging Asia, rises. According to the US government's Energy Information Administration, Australia is rich in hydrocarbons (think oil and gas), was the world's second largest exporter of coal in 2011 and the third largest liquefied natural gas (LNG) exporter in 2012. Australia exports more than 70% of its total energy production according to government sources.

Six months ago, Linc Energy (ASX:LNC) released two reports, estimating the amount of shale oil in the as yet untapped Arckaringa Basin ranging from 3.5 billion to an astounding 233 billion barrels. To put that into context, Saudi Arabia's reserves from its giant oil fields are estimated at 263 billion barrels. If the higher estimate is correct, it means the Arckaringa Basin is six times larger than the Bakken, 17 times the size of the Marcellus formation and 80 times bigger that the Eagle Ford US shale deposits.

And that's just one basin. Australia has several basins that could hold massive reserves of shale oil and gas, including the Cooper Basin, Canning Superbasin (containing several sub-basins), Carnarvon, Browse and Bonaparte basins, Georgina, Bowen and Perth basins as well as several other prospective basins.

Buru Energy (ASX:BRU) is exploring in the Canning Super Basin, and has had early exploration successes. However, most new drilling is focused on the Cooper/Eromanga Basin, which has been Australia's most productive basin historically, with companies like Santos Limited (ASX:STO) and Senex Energy (ASX:SXY) active there.

Foolish takeaway

The US Department of Energy predicts that Australia's shale industry will develop at a moderate pace, due to a lack of production infrastructure. In the short-term it's unlikely to replace the resources boom, but if estimates are correct, Australia could overtake countries like the US and Saudi Arabia and become the world's largest supplier of oil and gas.

Limited oil supply and growing demand mean oil prices are likely to rise over time. Position yourself to profit from this trend now, with The Motley Fool's brand-new FREE research report, "3 Oil Stocks to Send Your Portfolio Gushing Higher".

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Motley Fool writer/analyst Mike King owns shares in Santos.

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