Linc Energy today announced a major shale oil and gas discovery around Coober Pedy in South Australia. Unrisked prospective reserves have been separately estimated by two independent consultancies at 103 and 233 billion barrels of oil equivalent.
That is an extraordinary find. The low estimate is equivalent to Kuwait’s proven reserves and the high similar to Venezuela’s – the world’s largest. Australia’s current proven oil reserves are around 4 billion barrels.
At current oil prices of $95 a barrel, the oil and gas would sell for between $9.8 and $22 Trillion.
These giant figures in Linc’s ASX announcement sit alongside a more modest estimate, their ‘Risked Mean’ of 3.5 billion boe, worth a mere $332 billion. Let me commend the explanatory and qualifying footnotes if you want to properly understand these estimates.
Even at the lowest of these estimates, the people of Australia, who own these minerals, can now look forward to substantial cuts to wage and business taxes as this new income stream comes on.
Oil and gas production in Australia is subject to the Petroleum Resource Rent Tax. This collects 40 per cent of producers’ EBIDTA (Earnings Before Interest, Depreciation, Taxation and Amortization) for the right to take Australia’s resources – an extraction charge, if you like.
Linc and its partners will have to capture the energy, of course, at cost unknown. But they will pay an effective 58 per cent tax rate – 40 per cent PRRT then 30 per cent Company Tax on remaining profits.
The only question is, how may we migrate this clever tax regime to copper, gold, uranium, bauxite and all the other minerals removed from our bit of crust?
And I hope for Linc’s sake they don’t need too much process water – Coober Pedy is 500 km north of Port Augusta and mighty thirsty country. There are also separately taxable carbon emissions to consider, which vary enormously by project type.
ADDENDUM: This post and my tongue-in-cheek valuation were too much fun to be true. Linc have undertaken corrective MSM interviews . Below is the Fairfax corrective.
http://www.theage.com.au/business/20-trillion–not-reality-check-for-linc-oil-find-20130124-2d8zf.html
