Santos, Woodside look overseas for oil as Australia’s reserves slide further

The first flows from Santos’s Pikka oil field in Alaska represent a strategic shift for the Australian oil and gas producer as it seeks to increase its share of production and profits abroad. More broadly, it signals the declining prospects for significant new oil production in Australia.

Since the start of the conflict in Iran, the world’s third-largest holder of oil reserves, fuel security has been elevated from an afterthought in Australia’s energy policy dialogue to a prime focus for the federal and state governments.

It is often argued that Australia just needs to drill more to boost domestic fuel security. After all, last financial year it imported about 95% of its daily refined fuel consumption of 1.08 million barrels a day (mbpd), based on data from the Australian Petroleum Statistics (APS). Domestic production has dropped to 46,600bpd, a level not seen since the late 1960s.

Australia’s Energy Commodity Resources 2026 report by Geoscience Australia shows the country’s commercial proven and probable (2P) oil reserves were 213.4 million barrels (mb) at the end of 2024, down 6.8% from a year earlier. That equates to a little over six months of Australia’s consumption. 

While Australia has larger condensate reserves, its two refineries are unable to process it. Instead, almost all of it is shipped to Singapore for use as a feedstock for petrochemical plants. The oil industry usually conflates crude oil and condensate production, classing the latter as reserves. However, they are quite different forms of petroleum. So to count Australia’s 899 million barrels of 2P condensate as crude oil, as the industry often does, is inaccurate.

Poor domestic oil prospectivity has now prompted Australia’s two largest listed oil and gas producers to look overseas to develop oil resources. 

Santos developed the 80,000bpd Pikka oil field, despite discovering the Dorado oil and gas field in the Bedout Basin offshore Western Australia in 2018. Dorado has contingent light oil and condensate resources of 162mb, compared with Pikka’s 400mb of gross 2P oil reserves plus 600mb of contingent, potentially recoverable, reserves. Santos has said that expansion of Pikka could reach a production rate of 120,000bpd.

Santos has indicated it will undertake further drilling in the Bedout Basin to identify additional reserves. But for Dorado to match the scale of Pikka, it would be the largest find in Australia in decades.

Woodside’s international oil exposure grew significantly after the merger with the petroleum arm of BHP in 2022, when it acquired interests in the Atlantis, Mad Dog and Shenzi oil fields in the Gulf of Mexico. In 2024, Woodside increased its international oil output further when its Sangomar oil field offshore Senegal in west Africa started production. 

Sangomar accounted for more than half of Woodside’s international oil output in the first half of 2026, and more than double its oil production in Australia. Woodside’s international operations will expand further in 2028 when the 110,000bpd Trion oil field offshore Mexico is expected to come online. 

The Trion project, which is 60% owned by Woodside, is estimated to cost US$10.43 billion (AU$14.56bn), more than five times the cost of Woodside’s Greater Enfield project in 2019 (the last Australian oil field it developed). Greater Enfield’s production in the first of half of 2026 was about one-tenth of Sangomar’s.

The Geoscience Australia report does not provide much optimism for unconventional contingent oil resources in the Bowen and Surat basins in Queensland, the Canning Basin in Western Australia, the Cooper Basin in South Australia, and the Beetaloo sub-basin in the Northern Territory. It estimates these basins contain only about 154mb of unconventional oil resources.

The only form of liquid petroleum resources Australia has is shale oil, located near the coastal areas of central Queensland, according to Geoscience Australia. It estimates there are 13,430mb of shale oil, but these resources have a colourful history – they have been shown to be uneconomic and the most environmentally challenging of all forms of oil to extract. 

Australia had a shale oil boom in the 1970s after that decade’s oil shocks attracted ExxonMobil, only for it to walk away when the project did not stack up economically. 

Oil and gas exploration spending in Australia reached a 10-year high in the March quarter of 2026, but early results in basins such as in the Beetaloo sub-basin in the Northern Territory and the Taroom Trough in Queensland suggest more gas potential than oil.

While it may be politically salient for policymakers to focus on new domestic oil production and refining capacity, Australia is unlikely to produce enough oil to meaningfully boost its fuel security. Instead, they should focus on reducing oil demand by electrifying as much of Australia’s transport system as quickly as possible. 
 

First published in Energy News Bulletin.