The proposal to build a $2 billion oil and gas logistics hub in Adelaide should be seen as a major step for the development of oil and gas production in the Cooper Basin.
Private development company Adelaide Capital Partners has reportedly paid $100 million for a 400-hectare site at Gillman, north-west of Adelaide, and according to The Australian the partnership is proposing a "visionary" development to support the state's oil and gas industry.
This includes the rapidly growing Cooper Basin region which intersects South Australia and Queensland and has a pipeline that runs to Adelaide as well as others that run to Queensland and New South Wales.
Over the last two years many of the oil and gas producers focused on the Cooper Basin have seen dramatic increases in reserves and production. Senex Energy Ltd (ASX: SXY) grew full-year production by 108% in 2013 and is part way through an aggressive 30-well drilling program, while Beach Energy Limited (ASX: BPT) added an extra 2.5 million barrels to its proven and probable (2P) Cooper Basin reserves in February.
Drillsearch Energy Limited (ASX: DLS) is another operator with a rapid growth profile. In January Drillsearch raised its FY14 production guidance by up to 43%, to as much as 3.3 million barrels of oil equivalent (mmobe), which would triple the 1.1 mmobe produced in FY13 and represent a production increase of 650% in just three years.
The Cooper Basin has been operating for over 50 years and already has existing infrastructure to facilitate exploration and production, including the Moomba processing plant majority owned by Santos Limited (ASX: STO). However, the proposed Adelaide development would provide additional support infrastructure to the remote region for the significant prospective growth to come.
Foolish takeaway
Given the considerable investment involved, the proposal reiterates the long-term growth potential of the Cooper Basin for both oil and gas. With shares of many of the energy producers currently trading at attractive valuations relative to their earnings and forecast growth, it gives long-term investors another great reason to bank on Cooper Basin energy producers.
