Australians who are considering buying stocks of oil and gas companies on the basis of the reported $20 trillion worth of potential oil reserves at the Arckaringa Basin in South Australia: beware.

Oil experts are casting doubts on initial estimates by two independent consultants that the area could have between 133 and 233 billion barrels of oil equivalent (bboe). Even Linc Energy, the company which released the report, doubted the accuracy of the estimates or how the consultants reached those figures.

However, Peter Bond, chief executive of Linc Energy, acknowledged the huge potential of the area which could have 2 to 3 million acres of oil reserves, but he disputed the initial estimates.

"That's not our valuation. I don't know who did that but someone's got a calculator out and come up with that number . . . but we wouldn't put a valuation on it at this stage," Mr Bond said in a statement.

Thomas Pascoe, a financial market export and has worked in Lloyd's of London insurance market, in an article for The Telegraph, explained that De Goyler and MacNaughton, one of the independent consultants, based its 113 bboe estimate on a P1 scenario.

That is based on a 90 per cent chance of recovery and the current state of play which is pegged at 14 bbo of oil and a total 60 bboe of oil and other energy products in the shale.

On the other hand, the 223 bboe is based on a P2 scenario or a 50 per cent chance, which was reckoned by Gustavson Associates.

Mr Pascoe said that if risking is taken into account, the true reserve would likely come to 3.5 bboe, definitely much lower than Saudi Arabia's 263 bboe reserves.

Saudi Arabia, according to a compilation of several estimates made by the Organisation of Petroleum Exporting Countries, CIA World Factbook and oil companies, has the second-highest estimate of reserves by country between 265,405 and 267,017 MMbbl. Venezuela is the highest at 211,169 to 297,571 and on third place is Canada at 173,625 to 175,200.

Mr Bond said that the $20 trillion estimate was based on the P1 and P2 scenarios of volume multiplied by the current oil price of $95 a barrel.

Actually, even the two consultancies acknowledged the lack of certainty "that any portion of the prospective resources estimated herein will be discovered. If discovered, there is no certainty that it will be commercially viable to produce any portion of the resources."

However, with the oil and gas sector being characterised by speculations, news of the discovery caused Linc's stock to rise 30 per cent and reached an 18-month high of $2.82 on Wednesday.

Mr Bond disclosed that Linc paid four years ago $104 million for its exploration acreage at Arckaringa and spent another $30 million to drill 15 to 16 holes and on 3D seismic tests covering 1,000 kilometres..Half of these holes targeted shales.

He added that Linc is seeking a partner willing to spend up to $300 million to develop the resource and prove up reserves. It appointed Barclays Bank to search for potential farm-in partners for the venture.

Basin engineers in Arckaringa found oil in droplets which are indicators that oil is in the liquid and could be extracted using modern fracking process.

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