The South Australian government has awarded $36,000 through its innovation voucher program to Eyre Peninsula mineral exploration company Minotaur Exploration.

Minotaur will use the funds to investigate how two clay minerals found in the southwest of the state could be used in the manufacture of ceramic proppants for the local oil and gas industry.

"Minotaur will work with researchers from the University of Adelaide and the US to analyse the properties of two clay minerals, kaolin and halloysite, found in the state's southwest," Science Minister Gail Gago said.

"If successful, these minerals will be used to manufacture a lightweight product called ceramic proppant, which is used in the gas drilling process in South Australia. Creating a new, local manufacturing operation could create new opportunities for our state and stimulate job creation in regional communities."

The state government intends to allocate $1.2 million across several projects through its innovation voucher program, with the goal of improving local productivity and competitive advantage.

Minotaur executive director Tony Belperio is confident that the demand for lightweight ceramic proppant will increase over the next few years to support exploration.

"Many of the Cooper Basin drilling programs source lightweight ceramic proppant from China," Belperio said.

"Our market research indicates that the quality of Chinese ceramic material is often poor and not optimised for deep Cooper Basin targets.

"The opportunity to create a local manufacturing base in ceramic proppant will reduce or eliminate the requirement for imported material, saving businesses time and money on shipping and transport.

"Importantly, it will produce a service that meets Australia's speciality needs."

South Australian Chamber of Mining and Energy (SACOME) CEO Jason Kuchel agreed that the establishment of local supply chains in general was an important step for the industry.

"Just in general it's really quite important that we establish a robust supply chain for the South Australian oil and gas sector," Kuchel told Energy News.

"We are probably too reliant on some products and services from overseas and this can either increase costs or lead to delays, which obviously increases costs as well.

"And so it's actually really quite critical that we can do that [establish supply chains] to ensure that we can be as productive as we possibly can.

"The increase in scale [could] also attract specialist oil and gas companies to set up a proper base here in South Australia, so all those things are good for South Australia but also good and important for the oil and gas sector."

While securing proppant is not a huge hurdle for the Cooper Basin oil and gas industry when compared with problems such as rig availability and infrastructure, the current supply chain has its roots in China and the US, and so comes with big delays.

Christian Lange is the managing director of Condor Energy, Australia's first home-grown fracture stimulation company.

Lange welcomed the idea of a local manufacturing and supply chain for proppants and the prospect of cutting down on delays, but noted that there were hurdles to be cleared if such a supply chain was to take off.

"If they can compete on quality, price and delivery, then it's great, because right now you've got about a 10-week lead time on ceramic proppants because they're 100% imported, either from China or the US, but mostly China," he said.

"So if someone can do it effectively and at the right price point then there's no reason that it won't be viable.

"The biggest issue in my mind is, to be honest with you, the delivery of bulk proppant. That's where the real economies of scale are going to be achieved, and right now, in shipping from China, the only feasible option is in one-and-a-half-tonne bags.

"So you still have to double handle and triple handle the product whereas if you had a local supply here and you could effectively manage the logistics supply chain - which is the other piece of that puzzle - into the Cooper Basin, then it will be much more efficient and better for the industry."

Energy News understands that at present, proppant has to be shipped in 1.5 tonne bags because of transport hurdles in getting it to the Cooper Basin.

Lange said that if the material could be transported in bulk, such as in silos, then it would represent a step-change for the logistics that exist in the region.

 

"I think that at the end of the day, really it will come down to economics and the ability to produce the quality of material that we require in the industry," Lange said.

"I think the market is going to be what the market is going to be based on demand for fracture stimulation in the cooper basin.

"The proppant is not a big enough deal that it has any real impact on people's programs. The impact on people's programs is the number of drilling rigs and the funding of various unconventional or conventional drilling programs."

As far as expanding the South Australian industry and fostering local business goes, SACOME's Jason Kuchel said there's always room for improvement.

"There's always more that can be done, that's not a criticism of the government, but there is always more that can be done."