Facebooktwitterlinkedinmail

A General View Starting From The U.S.A.

Are other countries going to have the same experience with regard to shale oil and gas as the United States has had recently?

What about China, Russia, and Europe, and the other parts of the world?

 

Shale’s potential can be appreciated by a brief examination of the world shale oil and gas map, produced by the U.S. Energy Information Administration and Advanced Resources International in May 2013, from which it can be seen that shale oil and gas formations occur on all continents. Also, the EIA and ARI study “Technically Recoverable Shale Oil and Shale Gas Resources: An Assessment of 137 Shale Formations in 41 Countries outside the United States” of June 2013, ranks countries in terms of technically recoverable shale oil and shale gas resources. Here, Russia, the U.S.A., and China are ranked by the EIA in the first three places of technically recoverable shale oil resources, with 75 billion barrels, 58 billion barrels (or 48 billion barrels according to ARI estimates), and 32 billion barrels respectively. With regard to technically recoverable shale gas resources, the EIA ranks China, Argentina and Algeria in the first three places with 1,115 trillion cubic feet, 802 trillion cubic feet, and 707 trillion cubic feet respectively. ARI differs in its estimates placing the United States at number one, just ahead of China, with 1,161 trillion cubic feet.[spacer height=”15px”]

Clearly, however, as the EIA indicates, there is a difference between what is technically recoverable and what is economically recoverable: costs, technology and market factors make, or don’t make, a resource economically recoverable; and any negative effects of hydraulic fracturing, or fracking, on the environmental would also have to be brought into the equation.[spacer height=”15px”]

p2
– Click Image to Zoom –

Top 10 Countries with Technically Recoverable Shale Oil Resources

Rank

Country

Billion Barrels

1

Russia

75

2

US (1)

58 (48)

3

China

32

4

Argentina

27

5

Libya

26

6

Australia

18

7

Venezuela

13

8

Mexico

13

9

Pakistan

9

10

Canada

9


WORLD TOTAL

345 (335)

Note:

EIA estimates are used for the ranking order. Advanced Resources International estimates in parenthesis.

Source:

EIA and ARI: “Technically Recoverable Shale Oil and Shale Gas
Resources: An Assessment of 137 Shale Formations in 41 Countries outside the United States”, June 13th 2013

 

p1

– Click Image to Zoom –

Top 10 Countries with Technically Recoverable Shale Gas Resources

Rank

Country

Trillion Cubic Feet

1

China

1,115

2

Argentina

802

3

Algeria

707

4

US
(1)

665
(1,161)

5

Canada

573

6

Mexico

545

7

Australia

437

8

South
Africa

390

9

Russia

285

10

Brazil

245


WORLD TOTAL

7,299
(7,795)

Note: The EIA
estimates are used for ranking order. Advanced Resources International estimates in parenthesis.

Source:

EIA and ARI: “Technically Recoverable Shale Oil and Shale Gas Resources: An Assessment of 137 Shale Formations in 41 Countries outside the United States”, June 13th 2013

[spacer height=”15px”]Production rising, but $60-70 price could push shale out of the market[spacer height=”15px”]

In April of this year North American tight liquids production reached 3 million barrels, up from 1.1 million barrels compared to the same period the previous year. And looking into the future, by 2020 production from shale oil and tight oil plays is expected to reach eight million barrels a day. This production growth, however, is expected to fall by around 30% per year as production declines from producing well, according to the Oil and Gas Journal (OGJ). (1)[spacer height=”15px”]

Furthermore, the EIA Annual Energy Outlook  2012 released June 2012 points out that there is uncertainty in the size and economics of the of the domestic shale gas resources, and this fact could have a considerable impact on  future domestic natural gas production: shale gas production could vary between 9.7 trillion cubic feet and 20.5 trillion cubic feet for 2035. (2)[spacer height=”15px”]

Who has been at the vanguard of the U.S. shale oil revolution? Smaller North American companies, for example Devon Energy, Chesapeake Energy, and Continental Resources who quickly shifted their focus from gas to oil as gas prices collapsed. And who are the leading producers in the formations? The top three in the Permian Basin are Occidental Petroleum, Pioneer Natural Resources and Apache; the leaders in the Bakken are Whiting Petroleum and Hess; and in the Eagle Ford, EOG Resources, ConocoPhillips, and Chesapeake.[spacer height=”15px”]

The OGJ adds that the largest plays, which are Bakken, Eagle Ford, and the Permian Basin, will contribute 60% of the overall risked production potential for United States and Canada tight liquids.[spacer height=”15px”]

The most significant emerging plays are in order of production potential Niobrara, Mississippian Lime, Anadarko tight oil, Utica and Woodford.  In Canada the order of precedence when looking at 2020 liquids potential is Duverney, Cardium, Montney, Bakken, and Alberta Bakken.[spacer height=”15px”]

With regard to costs, Rystad Energy, an independent oil and gas consulting services and business intelligence data firm, estimates that in the Bakken, about 90% of the new production comes from wells with breakeven oil price better than $60 per barrel.  (3)[spacer height=”15px”]

On the question of shale production and price. Abdullah al-Badri,  OPEC’s Secretary General stated that the new supply source would not significantly impact the Organization’s market share, adding that tight oil output would be in decline by 2018 and the cost of such developments means that a sharp drop in oil prices would restrain supplies. He made the following observation: “This tight oil is hanging on the cost. If the price were to drop to $60 to $70, then it would be out of the market completely.”  (4)[spacer height=”15px”]

Foreign companies moving in[spacer height=”15px”]

Total investments in U.S. shale plays were $133.7 billion between 2008 and 2012, and joint ventures by foreign companies accounted for around 20% of these investments, according to the EIA. The rest of these investments were either part of outright acquisitions or joint ventures between American companies and financial institutions.[spacer height=”15px”]

Most of the recent joint venture deals with foreign companies shifted from the dry natural gas plays to the more attractive, liquids-rich areas i.e. those with higher liquid-to-gas ratio, such as the Eagle Ford, Utica, and Wolfcamp.  (5)[spacer height=”15px”]

European companies have great influence on the industry. According to “Which foreign oil & gas companies are working in US shale plays?”, Penn Energy 20th September 2013, a high percentage of foreign owned lands are split between BP, Royal Dutch Shell and Statoil. BG Group, Total, and ENI also have interests. Chinese and Indian companies are also present but were not prominent as a whole. China, through its companies CNOOC and Sinopec has large positions in the more underdeveloped plays, Niobrara, Tuscaloosa Marine and the Utica, but of the five established plays (Bakken, Eagle Ford, Fayetteville, Haynesville and Marcellus) it only has a position in the Eagle Ford. India, through four of its larger companies, GAIL, Indian Oil Corporation Ltd, Reliance, and Oil India, has a combined medium sized interest in the Marcellus and Eagle Ford, the acreage of the Indian companies, however, is small. Australian companies have positioned themselves exclusively where the production is in the established plays. (6)[spacer height=”15px”]

Foreign Owners in the Selected Plays[spacer height=”15px”]

Foreign Owners in the Selected Plays

Company

Country

Net Acreage Holding

Royal Dutch Shell

Anglo-Dutch

1,487,000

BHP Billiton

Australia

1,100,000

Statoil ASA

Norway

1,069,000

BP (ex-Haynesville)

UK

550,000

Encana

Canada

535,000

CNOOC Ltd

China

466,000

Reliance Industries

India

313,000

Sinopec

China

285,000

Talisman Energy

Canada

282,000

BG Group

UK

187,000

Source: Which foreign oil & gas companies are working in US shale plays? Penn Energy 20th September 2013.

[spacer height=”15px”]Shale in Russia, China, Europe, Australia and Latin America[spacer height=”15px”]

Russia and China will lead the way in the production of resources from shale after the US according to executives at the Financial Times Global Commodities Summit in Lausanne, Switzerland, as reported  in April by Rigzone. Torbjorn Tomqvist, chief executive of trading house Gunvor said (…) it was clear that shale production on a similar scale to that in the US is possible in several of the world´s biggest current energy producers and consumers, but that Europe is unlikely to be transformed by it. Mr Tomqvist added “I think in Russia, you will see the first major change. You have the political climate there to drive through large-scale shale operations both in gas and oil.” (7)[spacer height=”15px”]

Russia’s shale oil potential is not fully mapped, but the Bazhenov formation in Western Siberia is considered one of the largest, and ExxonMobil teamed up with Rosneft at the start of 2013 to begin drilling. (8)[spacer height=”15px”]

Tomqvist also said that China, Australia and South America were promising as shale exploiting countries. Bob H. Takai, general manager in energy for Sumitomo Corp said that China could rival Russia as the biggest shale producer: “As far as the reserve is concerned I think China has got the largest potential reserves of shale oil and shale gas, even bigger than the US.” But he added that before those reserves could be accessed China would struggle with problems ranging from infrastructure to the availability of water. (9)[spacer height=”15px”]

The country could, according to “Clyde Russell: Australia, Not China, the Next Great Shale Gas Hope”, lose out to Australia in the race to be second behind the United States in bringing significant production on line. Australia has several advantages over China when it comes to developing shale gas reserves. Even though the reserves are in remote areas, there is existing infrastructure available as some of these areas, such as the central Australian Cooper Basin, have long histories of conventional gas and oil production. This gives shale gas output the ability to flow from the centre of the country to the east coast where it could be fed into existing, or expanded, LNG plants. In fact, Santos, Australia’s number two energy firm has started shale output on a commercial scale and plans to feed the gas into an LNG plant that it is building in partnership with Malasia’s state-owned Petronas. (10)[spacer height=”15px”]

Looking towards Latin America, Ali Moshiri president of Chevron’s  Latin America and African operations stated that “The potential in Vaca Muerta  is big enough to make Argentina energy independent”. The country’s shale oil and shale gas reserves are located mainly in this formation which is located in the province of Neuquén. He added that Chevron and YPF may be able to access the oil using vertical drilling techniques rather than the horizontal methods used to develop most of the world’s shale gas, and said on this: “I think maybe Vaca Muerta will be the place that everybody comes to look at to see how to develop shale oil”. (11)[spacer height=”15px”]

With regard to Europe, the UK has seen a sea change in its attitude to shale gas exploration, the fracking ban was lifted in mid-December last year and more recently the government announced large tax breaks for shale gas production.[spacer height=”15px”]

Poland holds “some of Europe’s most favorable infrastructure and public support for shale development” according to the EIA May Report prepared by Advanced Resources International “World Shale Gas and Shale Oil Resource Assessment”. The report highlighted the Baltic Basin in northern Poland as “the most prospective region”. However, estimates of shale resources in Poland vary significantly. The Polish Geological Institute (PGI) and the US Geological Survey (USGS) collaborated on a preliminary shale gas and shale oil assessment of the country in 2012. The PGI estimated that technically recoverable shale gas resources in the onshore Baltic-Podlasie region to be between 8 and 22 trillion cubic feet, while shale oil resources were estimated at between 1.6 and 1.9 million barrels. But the corresponding USGS estimate was around 1.35 trillion cubic feet of gas and 0.17 billion barrels of oil. The EIA report estimated 146 trillion cubic feet and 1.8 billion barrels for Paleozoic shale gas and oil.[spacer height=”15px”]

Poland has made the most progress in Europe in bringing about a shale industry, but early results have not, however, met the country´s high initial expectations. The EIA considers that it is too soon to dismiss the country´s shale potential.[spacer height=”15px”]

Eastern Europe, excluding Poland, has significant prospective shale gas and oil resources, according to the EIA. They exist in the Dnieper-Donetz Basin, in eastern Ukraine and southern Belarus; the Carpathian Foreland Basin that stretches from southwestern Ukraine through northern Romania to the Black Sea; and the Moesian Platform that stretches across Romania and Bulgaria. The EIA estimates that that total risked, technically recoverable shale for these three basins is 195 trillion cubic feet of shale gas and 1.6 billion barrels of shale oil and condensate.[spacer height=”15px”]

Numerous shale gas basins and formations exist in northwestern Europe, but France and the Netherlands have fracking bans in place. Germany´s government has not yet approved shale gas fracking, although it is looking at allowing the existence of a strictly-regulated industry.[spacer height=”15px”]

In Denmark, Norway and Sweden potential extractable shale gas exist in the Alum Shale which according to the EIA is judged to be shallow, thin and immature. Nevertheless the EIA estimates that there are 32 trillion cubic feet of risked, technically-recoverable shale gas resources in Denmark.[spacer height=”15px”]

Two basins in Spain have been identified as having potential for shale gas and oil: The Basque-Cantabrian Basin, in northern Spain, with potential for wet gas and condensate; and the Ebro Basin which was not quantitatively assessed by the EIA for its May 2013 study. Technically-recoverable shale gas resources in the Basque-Cantabrian Basin are estimated at 8 trillion cubic feet, while there is also an estimated 100 million barrels of risked, technically recoverable shale oil resource there. There is political opposition to fracking in this country that is more sparsely populated than its northern neighbours. (12)[spacer height=”15px”]

By Stuart Wilkinson
oileconomyfocus.com

___________________

Shale Oil: Will the “Shale Revolution” be just in the United States?

___________________

References

1 and 3: North American liquids production will reach 8 million bbl/d by 2020. Oil and Gas Financial Journal, Vol. 10 Issue 5
2: U.S. Energy Information Administration. What is shale gas and why is it important?  5th December 2012
4: OPEC Relaxed About Cost-Sensitive Shale Oil. DownstreamToday.com. 1st October 2013
5: Foreign investors play a large role in U.S. shale industry. U.S. Energy Information Administration, 8th April 2013
6: Which foreign oil & gas companies are working in US shale plays? Penn Energy 20th September 2013. Source: Evaluate Energy
7 and 9: Shale Boom Could Happen in Russia, China but not Europe. Rigzone, 18th April 2013
8: Statoil Eyes Russian Shale over U.S. Fields. The Moscow Times 26th August 2013
10:  Clyde Russell: Australia, Not China, the Next Great Shale Gas Hope. Rigzone, 17th September 2013
11:  Chevron, YPF Sees Argentina as possible Shale-Oil Pioneer. Rigzone 16th May 2013
12: EIA Report prepared by Advanced Resources International “World Shale Gas and Shale Oil Resource Assessment”. May 17th 2013[spacer height=”15px”]

Also see in the OEF ENVIRONMENT Section “Fracking: Water and Earthquakes”, and in the OEF TECHNOLOGY Section “Fracking with Gas rather than Water”.

SHARE YOUR THOUGHT

comments