Shale gas, and now tight oil has seen an unprecedented increase in energy supply in North America. It has entirely changed the energy landscape, resulting in a dramatic fall of the gas price and reversing long-term decline in US oil supplies.
But can this “shale gale” be exported to other regions of the world? IHS-CERA has conducted various studies of global shale gas and tight oil potential to better understand the real potential in the rocks and, importantly, the constraints that exist to develop these unconventional resources.
Many organic-rich shales exist around the world, the North America continent is not unique in having shales rich in gas and oil. But some of the shales, for example in China, are not buried deeply or are not mature enough to have generated oil or gas in sufficient quantities. Others are remote from infrastructure and markets.
Some of these shales could be produced, but at a price, and any energy source needs to compete with other sources. A major obstacle in countries such as India and China is a regulated market with prices too low for shale gas to compete.
A more liberated market like Europe will enhance competition to develop competitive resources, including shale gas. In spite of constraints, large amounts of shale gas resources in many parts of the world could be developed at a wellhead price of US$8-10/Mcf and could well compete with other energy sources.
Other barriers to development include access to land and regulatory obstacles. Mineral rights for landowners and easy permitting have helped the shale gas industry in North America to quickly develop. But in many other countries, these incentives are not present and regulatory “red tape” is even counter-productive. Recent steps by the UK government and other stakeholders are encouraging, with the promise that part of the revenue from shale gas should go back to the local communities.
Recent work by IHS-CERA, comparing shale and tight oil plays around the world with North America analogues, has revealed that organic-rich shales of excellent quality exist and are mature for both oil and wet gas, some in combination with extensive tight oil reservoirs, such as found in the Vaca Muerta formation in the Nuequen Basin in Argentina.
It is likely that these “wet gas” plays, with gas liquids in combination with light oil, are the most profitable to produce, particularly in areas where existing production facilities and infrastructure exist. But the rocks need to reveal if a play is worth developing, and only by drilling can the presence of sufficient recoverable resources be proven.
Drilling in Poland has demonstrated that the initial hopes of establishing substantial commercial production are not always met, but the recent success in the Bowland shale in the UK looks promising, although large uncertainty remains about the resource base, a point of current discussion.
Importantly, large shale gas and tight oil resources have been identified outside of North America. Even after thousands of producing wells have been drilled, the learning curve is alive and well. Improved operating practices and enhanced technologies are driving increases in the resource base and productivity. Global successes should follow in areas where the North American experience can be replicated.
Jan Roelofsen is one of the speaker’s in Tuesday afternoon’s SPE Offshore Europe 2013 keynote session, Oil and Gas in the Future Energy Mix.
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