By Maria Gallucci - An oil boom could be on tap for Australia’s northwest coast. U.S. energy firm Apache Corp. NYSE:APA says it has made what might be Australia’s largest oil discovery in decades, in a region that drillers had previously abandoned after coming up empty-handed.
The oil field off of Western Australia’s Canning Basin potentially holds up to 300 million barrels of oil, according to Apache, though only a slice of those deposits would be recoverable. The finding was made by the Phoenix South-1 well, which was initially exploring for gas when it stumbled upon the vast oil patch.
The country needs new oil sources to replace its quickly diminishing reserves from existing fields, the Wall Street Journal noted. Australia oil production in 2013 dropped by 17 percent to 416,000 – a four-decade low – as conventional fields dried up, according to BP PLC NYSE:BP.
The possible economic gains from the find come at a good time for Western Australia, which has recently suffered from the bursting of its iron ore export bubble. According to the Sydney Morning Herald benchmark iron ore prices are 31 percent off their January 1 level, and that decline has been aggravated by an almost 5 percent rise in the local currency this year.
Iron ore, one of the world's most fundamental commodities, sold off sharply beginning in 2013 after several months of rising prices prompted producers to boost output at the same time that demand in China waned.
Furthermore, the IBTimes UK reported in June that staff at one of the world's largest mining groups was bracing themselves for around 3,000 job cuts as BHP Billiton is pegged to slash headcount to cut costs in its iron ore business.
The nation's coal industry uhas also taken a big hit, losing more than 12,000 jobs since 2012, amid rising competition and volatile commodities prices.
Apache’s drilling results so far “point to a commercial discovery,” Thomas Voytovich, a senior executive at the firm’s international arm, told reporters. “If these results are borne out by further appraisal drilling, Phoenix South may represent a new oil province for Australia.”
Boosting the company’s optimism is the oil’s high-grade “light” quality, which is easier to produce than heavier blends and attracts premium prices, analysts said, according to the Sydney-Morning Herald.
Peter Strachan, a principal at StockAnalysis, told the paper that that the discovery could likely hold up to 60 million barrels of recoverable oil. He estimated the field would cost about $1 billion to develop using a floating production vessel, which could potentially produce up to 25,000 barrels of oil per day.
The full significance of the Phoenix South discovery, however, likely won’t be known for decades, Simon Andrew, an energy analyst at Perth-based broker Hartleys, told the WSJ.