Delight in Aussie town over 'trillion-dollar' oil find

The South Australian town of Coober Pedy, with a largely underground-dwelling population of just 1,695, is about to challenge the mighty Saudi Arabia as the world's oil capital – at least if claims it could be sitting on more than $20trn (£15trn) of black gold are to be believed.

The residents, who mostly live in underground "dugouts" to protect themselves from the scorching sun, are euphoric after two new geological surveys estimated that 65,000 sq km of the surrounding Arckaringa Basin in the Australian outback contain up to 233 billion barrels of oil. This puts their town within a whisker of Saudi Arabia's 263 billion barrels, according to the Herald Sun newspaper.

In truth, while it is theoretically possible that the licence holder, Linc Energy, will be able to recover every single one of those 233 billion barrels, it will probably only be commercially viable to extract a small fraction. Even the report admits this, conservatively estimating that the Arckaringa Basin holds 3.5 billion barrels of recoverable reserves. Saudi Arabia's 263 billion barrels, however, refer to recoverable, rather than total, reserves.

But even 3.5 billion barrels is worth $400bn (£250bn) at current prices – and the eventual amount could be a good bit higher than that, still in the realms of a game-changing windfall for South Australia.

Tom Koutsantonis, South Australia's mining minister, said: "All these things are luck and risk. I think what we're seeing up there is a very, very big deposit. If it comes off, it will certainly be a very significant amount of oil reserves."

John Young, a resources analyst at Australia's Wilson HTM, added: "I think it's unwise to hang one's hat too much on the size of the numbers [but] the numbers are going to be very large."

The hydrocarbon in question takes the form of shale oil, meaning it will need to be extracted through the environmentally controversial practice of fracking.

This releases the oil from the shale after being blasted with a mixture of sand, water and chemicals into the rock at high pressure.

The citizens of Coober Perdy could be forgiven for being a trifle blasé about the whole thing. After all, the town is already well known in Australia as the "opal capital of the world", producing most of the world's gem-quality stones.

Opal was found in Coober Pedy on 1 February 1915. Almost 98 years to the day later, the town has staked its second claim to fame in the world of resources.