Commercial European shale a reality in the year 2020?
Commercial European shale a reality in the year 2020
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Commercial European shale a reality in the year 2020?
John Goodfellow, head of Shell's onshore natural gas business in the US, stated at the World Trade Group's E&P Technology Summit in Houston that he did not see commercial shale production coming on in Europe before 2020.
European shale gas service companies and drilling companies are a decade behind activities seen in North America.
In addition Europe's high population might not tolerate intense development, Goodfellow said. Several executives in oil and gas majors share Goodfellow's assessment.
I have written several articles amongst one quoted in Natural Gas For Europe web site on October 17th, where I touched on these issues as well.
http://naturalgasforeurope.com/the-path-to-successful-development-of-shale-gas-in-europe.htm
Another article were I elaborate more on the key challenges for Shale Gas success in Europe;
http://www.articlesbase.com/business-opportunities-articles/successful-exploitation-of-shale-gas-in-europe-depends-on-solving-key-challenges-3428312.html
Europe has a populous landscape and the European environmental requirements are in general strict, which create challenges for the drilling infrastructure, including rigs and service companies needed for unconventional exploration and development.
The industry segment is not as developed as it is in North America, and require massive transfer of knowledge, but also a learning curve to understand the geological challenges connected with Shale Gas in Europe.
The global gas market indicates a growing gap between supply and demand but according to EU commission and some market analysts it won't be filled by unconventional gas.
So what has happened so far in Europe with respect to Shale gas exploration?
Shell has drilled its first exploration well in Sweden's Alum shale but has said it could take a year to evaluate the first wells.
Shell also has prospective shale acreage in Germany, while Total has holdings with shale potential in France and in Denmark.
ExxonMobil has 5 concessions in Poland, which yet has not been explored and tested.
Statoil has not yet entered the European shale Gas exploration venture, but positioned them selves in the Marcellus and Eagle Ford plays in the US and started some exploration activities in South Africa.
Polskie Gornictwo Naftowe i Gazownictwo SA, drilled the country's first shale well in April 2010 and were encouraged by its results, they started hydraulic fracturing at its first shale gas well.
Contractors from Halliburton Co. began the process known as fracking, forcing water and chemicals underground to break up rock formations and extract gas, at the Makrowola-1 drilling site, 120 kilometers (74 miles) from Warsaw. The company known as PGNiG expects to make an initial estimate of the deposit's size in about a month, said Piotr Gliniak, head of exploration.
The operator stated that they will know in a year or two whether it makes economic sense to extract this deposit, and production could start in five years from now. For the well to be profitable it must hold "tens of billions" of cubic meters of gas, and its potential is highly uncertain at this moment.
Lane Energy Poland and Schlumberger has initiatedthe first exploration shale gas well evaluating the shale in the Baltic Basin of Northern Poland. In addition, drilling on a second well in the area is at an advanced stage.
Schlumberger will be providing Completion, Stimulation and Well Testing Services during the production evaluation phase of the operations. The Completion program has been submitted to the Polish Mining Authority and Completion operations are scheduled for October 2010.
ConocoPhillips, and its Eastern European partner Lane Energy Poland Sp. z o.o. plan to start drilling their first exploratory well for natural gas in a Polish shale formation this year.
Not alone
Competition from other unconventional gas markets like China and Latin America will play an important role to what focus unconventional resources will get in Europe from the operators.
Another aspect is competition from conventional gas resources from the big neighbour next door Russia. The Russian gas becomes more and more expensive to extract and transport, however is still relatively cheap.
The question I ask, is Europe willing to pay the extra it will take to become less energy import dependant?
Is Europe better off, trying to utilize its technological advancement within Alternative Energies, like solar, wind and geothermal ones?
The future of European Shale Gas adventure is uncertain, although everybody recognizes it has a potential, however the industry has not yet been able to convince the legislators in Europe, that the potential is large enough and economic viable alternative to become an important element in the European gas market yet.
You can listen to the 4td edition of Oil and Gas Europe Radio show of October 19th 2010
http://oilandgaswatcheurope.com/category/unconventional-gas/
http://recordings.talkshoe.com/TC-25360/TS-409193.mp3
Land grab and nothing else?
Up until now, the Shale Gas play has been a huge land grab in various European countries, at a fraction of the cost in North America. Right now Poland is receiving the most attention. By some estimates Poland has approximately 50 trillion cubic feet (TCF) of natural gas reserves.
The first shale oil well in the Paris Basin is due this fall and would tell us something about its potential in this region.
Ukraine has no wells drilled to test its potential yet, however it is estimated to have around 450 TCF of recoverable Shale Gas in its 3 major onshore basins.
There is no shale gas production in Europe right now, and it is a long way ahead before the first production of Shale Gas potential will become a reality.
The next question will be how much will Shale Gas account for in European Energy balance sheets?
With big Shale Gas reserve potential in Europe, and cheap land costs under $1 per acre sometimes vs. $5000 per acre in North America for both oil and gas and gas prices are at least 50% higher in Europe than North America and the economics for a big discovery could be very compelling.
As drilling results begin to come out of Poland in the coming months, the market will get a much better idea of how fast this play will shape up. So far details have been hard to come by, but ConocoPhillips is drilling its second well in Poland. (Don't take that to mean the first one hit; it doesn't they'll likely drill 20-odd holes to start to build a database.)
Should someone announce a highly productive well, land prices will shoot up, and stock prices along with it.
And Europe is very keen to wean itself off politically charged Gazprom, the Russian gas company that supplies most of Europe's gas. Gazprom has already cut off gas supplies to one customer Ukraine, twice in the middle of winter. Europe's main source of domestic gas, Norway, saw its gas reserves peak in 2001 and production peak in 2004.
Author
Stig-Arne Kristoffersen is a Civil Engineer and Geoscientist with international oil and gas experience starting in the mid 1980's, with focus on risk assessment and exploration evaluation of both conventional and unconventional resources.
You can read some of his writings at; www.lulu.com/stig
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