The government announced yesterday that LAB SA had opened a new proppant testing lab to service the emerging unconventional oil and gas industry - though that's a bit of an understatement. It's practically still in the womb.

The lab represents an expansion for LAB SA into the oil and gas sector, after it developed a new "shockcrete" for mining companies at Olympic Dam and Broken Hill.

LAB SA started a decade ago as an independent construction materials testing lab working in the civil, commercial and residential construction industries.

General manager Andrew Attard said the company was now waiting on "some movement in Asia" regarding independent verification.

"People are just starting to hear about what we do and what we can offer … everyone's heard about the magic proppants - they're a highly sought after commodity so a lot of companies are sending in materials saying ‘can we use this or use that'," he said.

"The right choice of proppant is absolutely critical. It's not a new technology but it's a technology that's making companies reassess the viability of older wells … to see if they can reinvigorate them to get more output from them."

He said South Australian silica sand was of a high quality but more needed to be discovered, and companies were still learning about what processes were needed to clean it before it could be used as a proppant.

"There's no reason why they can't be used anywhere in the world," he said.

"We are close to the local suppliers and we've got a unique understanding of local products so we can get testing results done in a matter of days rather than weeks and that gives us about a 40-50% reduction in testing costs."

US market consultancy MarketsandMarkets said that while North America dominates the proppant market due to its growing demand for fracturing oil and gas wells, the Asia Pacific is the next growth market.

Sand is the most commonly used of the three proppants available ¬- sand, ceramic, and resin coated - due to its lower price.

Long road

However, there is still a long road ahead for Australian unconventionals - excluding CSG.

Chevron Corporation's decision pulling out of a joint venture with Beach Energy in March highlighted the long-standing problem with still risk-averse capital markets, but once oil prices and investor confidence return Australia should be much better placed to benefit from the upside.

While the government touts figures like the global proppant industry expected to grow more than $19 billion a year by 2019, outgoing Santos CEO David Knox told Energy News shale resources in the Cooper Basin - or anywhere in Australia for that matter - are years away from development.

Condor Energy founder Christian Lange, who provides frac services in the Cooper Basin, believes the SA government are "rock stars", with "the most pro-active department of state development … I wish all of them were like that".

He understands why they moved so early on the proppant lab, considering Condor has the only proper fluids lab in Australia, in Brisbane, where they can actually optimise fluids in-country.

Similarly with the local proppant lab, instead of having proppants sent overseas for analysis it will now be able to be analyses in Australia.

"So while it's ahead of its time in terms of [production] volume, it's necessary because we are going to need to continue to develop our local service options because we can't be relying on sending stuff back to the US every time we want to do something," Lange told Energy News.

"A lot of people seriously underestimate the degree of difficulty of operating in Australia. We're a remote island, and a lot of everything has to be imported, so the sooner we can become self-reliant, it's better for the country, the state economic growth and so forth."

As for development of unconventionals, Lange says the question is not which Cooper Basin-focused company is furthest advanced, but who has the deepest pockets to develop them.

Santos may be struggling under some $6 billion in debt, but it is still a major player along with the soon-to-be-merged Beach Energy-Drillsearch, Senex Energy and Strike Energy.

Beach and Cooper Energy also has some unconventional interests in the Otway Basin, which are at an even earlier stage, but they are no longer considered a priority given the low oil price, which has put the focus back onto cheaper and easier conventional prospects.

Most analysts seem to believe oil prices won't rebound seriously until 2017, after which more funds could be put into drilling shale and tight targets in SA.

Lange believes Santos needs to focus on becoming a low-cost operator, while Beach needs a healthier balance sheet to take on so much risk.

"All those companies have tremendous potential reserves of gas; how to get it out of the ground is the secret, and funding that," Lange told Energy News.

He says that while the oil price is an issue as it provides the cash flow, the gas demand in Australia - with Queensland's three LNG projects, the Arrow CSG fields waiting in the wings, and an east coast domestic market forecast to be short of gas next year - makes the domestic gas market very attractive.

"We only have a small population, and we have lots of naysayers saying ‘they'll need 100,000 wells everywhere', which is fictional because we don't have the domestic market to warrant that kind of activity," he said.

"There's an extraordinary amount of flexibility in the domestic gas market. It's pretty unique."

He says the Cooper's unconventional story is a few years off, because oilers still need to crack the code, find some farm-in partners and do all the work.

It's going to be all about appraisal work for the next few years, as will also be the case in the Northern Territory's Beetaloo Basin next year.

"They know the gas is there, now it's about how to get it out, so someone's going to have to drill some horizontals across a couple of zones of interest to really work out what the possibilities are," Lange said.

Transerv Energy has finally had some good fortune in the Perth Basin tight Warro field. Again, they know the gas is there, it's a case of unlocking the field.

"I would say that the Perth Basin, if you get a decent hit then it's a pretty direct path to development there," Lange said, adding that the Canning Basin is trickier, where the desire will be to monetise the liquids to fund the longer-term gas upside.