The size of the prize for shale oil may be huge, but I am somewhat more confident in Origin's focus on the middle Velkerri formation. While there may be oil in the middle Velkerri, I believe that Origin's primary focus will be the 45 TCF of natural gas, as fracking and flowing tight formations for natural gas has been generally more successful than tight oil formations.

The potential payout, from the RPG estimate of 4 billion barrels of shale oil in the middle Velkerri, is considerably higher than the payout from the natural gas. However, the success of flowing the shale oil is quite a bit more complex and the flow rates generally so low, that very few areas have the kind of success we see in the Bakken.

Alternately, fracking for natural gas has been proven in a number of locations around the globe, with much greater rates of success and very economical flow rates.

A prime example is today's news from the Georgina Basin in Australia. Statoil has been drilling for shale oil only - in Petrofrontier's 14 million acre concession that RPG estimated held 22 billion barrels of insitu shale oil. However, Statoil just announced that their first frack test well flowed no oil whatsoever. Statoil has drilled 5 wells into the Georgina Basin this year and was going to run fracking on three of them to test for any oil flowing. Statoil had found promising signs of oil staining and even small amounts of liquid oil in three of the five wells. They are now going to frack test only one more well after the first fracking test showed no discernable amounts of oil.

Note, Statoil was not drilling for or going after natural gas in the Georgina Basin and I was a holder of Petrofrontier up until about two weeks ago, so have been following this one quite closely. The risks for any new property like the Beetaloo are high, but with all the test data available to Origin and Sasol, who is successfully drilling for unconventional gas in British Columbia, I think they will be very successful doing the same in the Beetaloo.