Unconventional Oil & Gas - 2011 Annual Review

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The NewsBase 2011 Annual Review of the Global Unconventional Oil & Gas Sector

The NewsBase 2011 Annual Review of the Global Unconventional Oil & Gas Sector

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  • 1. January 2012 UOGM News Analysis Intelligence Published by 2011 Annual Review NewsBaseJANUARY 2 THE YEAR IN REVIEW Spotlight shines on UK’s unconventional gasFEBRUARY 2 3 Fracking furore The controversy surrounding hydraulic fracturing Reflections on a decade of shale 3 (fracking) showed little sign of abating in 2011,MARCH 5 which had a significant effect on potential shale gas Haynesville claims pole position 5 production in Europe.APRIL 7 New acreage awards boost Indonesia’s France’s decision to ban fracking has had a major CBM sector 7 impact on companies that are exploring shaleMAY 9 deposits in the country and the wider unconventional oil and gas industry. (Page 12) Fractious fracking debate explodes in wake of Pennsylvania blowout 9 Developments in France were watched closely byJUNE 10 the UK government as it assessed the best way Shale investments continue in North forward for its own shale gas industry. (Page 2) American gas island 10JULY 12 Meanwhile, the debate about fracking in the US intensified after a blowout at one of Chesapeake The Franco fracking furore 12 Energy’s shale gas wells in Pennsylvania. (Page 9)AUGUST 14 Chesapeake remained a major player in the US Shale offers North Africa alternatives 14 unconventional energy sector last year, with theSEPTEMBER 15 company claiming it had so far spent US$2 billion Chesapeake upbeat about Utica 15 on its acreage in the Utica shale. (Page 15)OCTOBER 17 Chesapeake’s CEO believes oil and gas reserves UCG potential could match shale gas 17 in the Utica shale could be worth US$500bn andNOVEMBER 19 has urged speedy development of the formation. (Page 15) Moving GTL into the oil business 19 Another shale play that is developing rapidly isDECEMBER 21 the Haynesville, which a report claimed had Argentina ready to reap rewards of its overtaken the Barnett as the largest producing unconventional potential 21 natural gas shale formation in the US. (Page 5)For analysis and commentary on these and other stories, plus the latest unconventional developments, see inside… Copyright © 2012 NewsBase Ltd. www.newsbase.com Edited by Ryan Stevenson All rights reserved. No part of this publication may be reproduced, redistributed, or otherwise copied without the written permission of the authors. This includes internal distribution. All reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its contents
  • 2. UOGM 2011 Annual Review page 2 JANUARYSpotlight shines on UK’sunconventional gasAs the UK’s unconventional gas industry gathers momentum questions are being raisedabout its environmental impact and sustainabilityBy Kevin Godier Cuadrilla Resources is advancing its shale gas operations in north-west England Environmentalists are advocating close scrutiny of fracking and a possible moratorium on drilling The government would find it difficult to ignore a new domestic energy source with gas imports risingDebate is intensifying over the potential in land near Kirkham more than 9,000 after the publication in mid-January of afor unconventional gas extraction in the feet (2,743m) down into the so-called report from the Tyndall Centre forUK as the country’s first shale gas well Bowland shale, which runs from Climate Change, which argued that nocontinues to make progress in Clitheroe to Blackpool in Lancashire. shale work should take place in the UKLancashire. The well is due to start extracting gas until the end of 2012, when a US According to Lord Browne, the former soon, and Cuadrilla has described it as Environmental Protection Agency reportCEO of BP, who has a significant the “first true shale gas” find in Europe, into the topic will produce its firstinterest in the project, the UK “is in a noting that preliminary drilling had results.strong position to benefit from potential confirmed and “possibly exceeded” itsgrowth in the unconventional gas.” But expectations. The firm counts among its UK prospectsfigures who oppose the embryonic backers a group of energy-focused The UK is one of a number of Europeanindustry have emerged in recent weeks, private equity funds managed by markets that have sprung to prominencethe latest being shadow energy minister, Riverstone, which is reported to hold a as potential shale gas plays, and oneHuw Irranca-Davies, who has called for a 36% stake in the company. Lord Browne, where public awareness, has, untiltemporary ban on shale gas and coal-bed who is now managing director of recently, been low. In addition tomethane (CBM) exploration. Riverstone Holdings’ European portfolio, Lancashire, possible plays in the UK that Shale gas production in the US has and a board member at Cuadrilla, have been mentioned in this contextgrown dramatically in the last decade, recently said: “Unconventional gas is include Surrey, Kent, Hampshire,almost tripling between 2007 and 2009 proving to be a game changer in the oil Cheshire and Nottinghamshire. However,owing to improved exploration and gas industry.” His comments are experts have said that the UK’s reservestechniques. These have helped to turn the helping to promote an unconventional of shale gas are unlikely to change theUS gas industry on its head, flipping the gas conference being held in Aberdeen in landscape of the market in an identicalglobal gas market from under-supply to early March, but will likely do little to manner to the effect of the gasover-supply. placate the environmentalist lobby now discoveries in the US, where the shale However, the prospect of thousands of emerging within the UK. The topic of basins are much larger. Althoughnew hydro fracturing drilling sites being unconventional gas has recently been accurate data are still lacking, petroleumestablished in the coming decades has pushed far higher up the UK agenda, geologist Nigel Smith at the Britishspurred environmental opposition to Geological Survey (BGS) said in Marchunconventionals in the US, with most 2010 that the UK’s shale gas might onlyconcerns linked to the potential With the UK expected to increase onshore production by 12%, orcontamination of drinking water. have to import 80% of its 11.64 million cubic metres per year, a fraction of the UK’s total 73.4 bcm gasUK debut gas supplies by 2020, an output in 2008. The report from theBy contrast the technique is relatively opportunity to tap into Tyndall Centre, as well as pointing outnew to the UK, where private company the environmental impact associated withCuadrilla Resources, founded in 2002, fresh domestic resources fracking techniques, drew attention to therecently completed the first exploratory may yet prove to be an lack of publicly available information ondrilling by sinking a test well in the its safety and stressed that more researchonshore part of the East Irish Sea Basin irresistible opportunity was needed. Copyright © 2012 NewsBase Ltd. www.newsbase.com Edited by Ryan Stevenson All rights reserved. No part of this publication may be reproduced, redistributed, or otherwise copied without the written permission of the authors. This includes internal distribution. All reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its contents
  • 3. UOGM 2011 Annual Review page 3 JANUARY It also predicted that gas drilling in aquifers or local communities.” including directional drilling andLancashire would give rise to a range of fracking, are conventional and have beenlocal concerns, including noise pollution, Caudrilla response used across the wider oil and gas industryhigh levels of truck movements and land- Cuadrilla has rejected the call by Irranca- (including previously in the UK) foruse demands. The report was funded by Davies, who revealed on January 27 that many decades.”the Co-operative, which offers green he had written to UK Minister of State The company defended theinvestment funds and is campaigning for Energy Charles Hendry urging a composition of its fracking fluid, whichagainst the expansion of ‘toxic fuels’ moratorium and to “properly explore the includes a biocide used at a lowsuch as crude from Canada’s oil sands. full implications of shale gas and CBM concentration, and said that it had Kevin Anderson, a professor of energy for the UK” while environmental submitted evidence to a House ofand climate change at the Tyndall Centre concerns over hydro-fracking techniques Commons energy committee’s inquiryat Manchester University, who authored were studied. This would prevent into shale gas.the report, has contended that the shale ministers being “caught napping” by a It additionally contended that the newgas should be left in the ground. surge of applications from companies industry could offer a “triple win” for “In an energy-hungry world any new looking to exploit shale gas reserves, he UK citizens: by helping to ensure energyfossil fuel resource will only lead to said, in comments that will inevitably security through new domestic energyadditional carbon emissions. In the case place fresh pressure on Westminster to supplies; by lowering the cost and priceof shale gas there is also a significant risk address the growing controversy volatility of energy to consumers and byits use will delay the introduction of surrounding fracking. reducing greenhouse gas emissions byrenewable energy alternatives,” he said. “The government must assure itself replacing coal as a power station The report’s launch also coincided and the wider public that fracking and the feedstock.with a visit to the UK by Josh Fox, associated processes used for extraction Cuadrilla made an earlier statement ondirector of the Oscar-nominated anti- of gas from shale or CBM are safe for January 17 seeking to reassureshale gas documentary Gasland, which use in the UK,” Irranca-Davies added. Lancashire residents andinvestigates the effects of shale drilling “Ministers cannot turn a blind eye and environmentalists that its processes wereon local communities. sacrifice our natural environment, or safe. “We are doing this by the book,” The UK’s official governmental compromise on our climate change said its CEO, Mark Miller, beforereaction has to date been cautious. targets.” adding: “We are using the bestAcknowledging that it is aware of reports Cuadrilla responded on January 27 technology the industry has.”from the US of environmental and health with a statement that said it had around With the UK expected to have toissues linked to some shale gas projects, 200 years of cumulative experience in its import 80% of its gas supplies by 2020,a letter from the Department of Energy team, including drilling and/or fracture an opportunity to tap into fresh domesticand Climate Change quoted by The stimulation of more than 3,000 wells, resources may yet prove to be anGuardian newspaper in mid-January said: mainly in the US. “The potential risks irresistible opportunity despite the“We understand that these are only in a associated with shale gas exploration are building clamour from the environmentalfew cases and that, when carried out not unique and are common to all lobby.correctly, shale gas exploration and hydrocarbon exploration,” it stressed.development does not pose a threat to “Shale gas exploration techniques, FEBRUARYReflections on a decade of shaleA new report analyses the impact of shale gas on the global gas market and highlights thelong-term opportunities that exist in the unconventional energy sectorBy Jim BrummAfter 10 years of development, shale gas development of that potential will focus to Global Shale Gas Technologies andhas the potential to impact global energy on North America, and the US in Markets.markets dramatically. But commercial particular, for the next decade, according Copyright © 2012 NewsBase Ltd. www.newsbase.com Edited by Ryan Stevenson All rights reserved. No part of this publication may be reproduced, redistributed, or otherwise copied without the written permission of the authors. This includes internal distribution. All reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its contents
  • 4. UOGM 2011 Annual Review page 4 FEBRUARY Sweden and Austria. A number of gas shale basins have also been identified in Australia, China, India and southern African nations. By 2015, the report said, commercial shale gas production is likely to be occurring in Poland, China and India, whilst many other countries will have advanced exploration and development efforts under way. Global shale gas production volume is expected to grow by 10.8% per year from 5.04 tcf (142.7 bcm) in 2010 to 8.44 tcf (239 bcm) in 2015. The vast majority of the increase in output is expected to come from North America, with US and Canadian Noting that demand for natural gas was tcm) – enough resource for almost 140 production rises accounting for over 96%expected to continue to increase, the SBI years at current levels of consumption, of global growth during the period.Energy report projected it would account according to ICF International’s vice- While US shale gas production isfor nearly 24% of global energy supplies president of gas market modelling, Kevin expected to increase by 7.7% per year toby 2020. That compares with the less Petak. Over 50% of the assumed resource 7.07 tcf (200.2 bcm) in 2015, Canadianthan 23% of global energy demand met is shale gas, he noted. growth is expected to be dramaticallyby gas in 2010, noted Shannon Shuflat, So far, shale gas production is higher, averaging over 48% per year,an SBI Energy analyst and co-author of predominantly limited to North America, with output reaching 1.24 tcf (35.1 bcm)the report. with the US accounting for the vast in 2015. “The confluence of growing natural majority of historic and current Global shale gas production growth isgas demand and breakthroughs in production. As a percentage of total further expected to grow by 6.1% pertechnological advancements has made North American gas production, shale year until 2020, reaching 11.34 tcf (321.1investments in shale plays attractive in gas has climbed from virtually nothing in bcm).recent years,” said the report’s co-author 2000 to 13% in 2009, enabling the US toAkash Shah. “Advancements in eclipse Russia as the world’s leading Long-term opportunitieshorizontal drilling and hydraulic producer of natural gas, the SBI report The long-term opportunities presented byfracturing technologies have enabled the said. Production in Canada, as yet the shale plays have attracted newachievement of high rates of gas only other nation extracting shale gas in participants into the industry. Theproduction from deep, low-permeability commercial quantities, has grown from successes in profitable shale gas recoveryshale formations. These breakthroughs about 5 billion cubic feet (141.6 million in North America have begun to attracthave facilitated access to some of the cubic metres) in 2006 to 172 bcf (4.9 the attention of international oillargest undeveloped gas resources in the bcm) in 2010, accounting for 3.5% of companies (IOCs) seeking to replenishworld,” Shah explained. Estimating the current global output. reserves and foreign national oilshale gas resource base at 18,775 trillion Commercial production in Canada companies (NOCs) that are seeking tocubic feet (531.7 trillion cubic metres), currently comes from shale gas wells in gain technical expertise in extractingthe report said the resource potential of the Montney and Horn River shale plays, unconventional resources. A notableshale gas exceeded that of conventional while the majority of US production is recent example of this is the gas dealglobal resources. Noting that world derived from the Barnett, Haynesville, signed by PetroChina and Encana.natural gas consumption in 2010 is Antrim, Woodford and Marcellus shales. Merger and acquisition activityestimated at 112 tcf (3.17 tcm), the SBI The successes in the North American between independents and the energyanalysts point out that even if only 25% shales, particularly in the US, have majors in the US shale plays began anof the total shale resource base becomes piqued the attention of governments and upward trend in 2008 is likely totechnically recoverable, shale gas alone gas companies alike around the world, continue as major energy companies seekcan meet natural gas demand for over 40 the SBI report said. to buy into US shale gas resources, theyears at current consumption levels. Noting several countries around the SBI report said, adding this will change In North America, reserves that can be world hold prime targets for shale gas the landscape for shale producerseconomically recovered using current exploration, it said significant gas shale substantially over the next severaltechnologies total over 3,700 tcf (104.8 resources had been identified in Poland, years. Copyright © 2012 NewsBase Ltd. www.newsbase.com Edited by Ryan Stevenson All rights reserved. No part of this publication may be reproduced, redistributed, or otherwise copied without the written permission of the authors. This includes internal distribution. All reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its contents
  • 5. UOGM 2011 Annual Review page 5 MARCHHaynesville claims pole positionThe US EIA has released data indicating that the Haynesville Shale has overtaken theBarnett Shale as the largest producing natural gas shale formation in the USBy Kevin Godier According to the EIA, the formation is producing 155.8 million cubic metres per day of gas Drilling volumes in Barnett have flattened as explorers have turned their attention to US$100 per barrel oil However, El Paso-based Lippman Consulting has said that Haynesville has not overtaken Barnett…yetThe Haynesville Shale in northwestern mid-February, having taken advantage of gas wells, it was only producing aboutLouisiana has become the largest technological advances in drilling and 5.25 bcf (148.6 mcm) of gas per day, theproducing natural gas shale find in the expanded pipeline infrastructure that EIA noted, citing reported gas pipelineUS, surpassing the more mature Barnett more efficiently gets the gas into the flows.Shale in North Texas, according to the market. Illustrating the production strides madecountry’s Energy Information by Haynesville producers in recent years,Administration (EIA). Haynesville surge the Louisiana Department of Natural For the past decade, the Barnett has Citing data from Bentek Energy, the EIA Resources (DNR) said recently that thebeen the US’ largest shale producer, said the Haynesville – which experts say state had issued permits for around 2,000hosting the drilling of around 10,000 could hold up to 39 trillion cubic feet wells in Haynesville and that more thanwells and leading the North American (1.1 trillion cubic metres) of natural gas – 1,000 had gone into production sincerevolution underway in the natural gas was currently producing around 5.5 mid-2008.sector. But the EIA noted in a March 18 billion cubic feet (155.8 million cubic The agency said 500 more wells werereport that Haynesville was now the new metres) per day of gas. near completion and that 121 weretop dog, after its gas players lifted their Even after the Texas site recovered currently being drilled – and stressed thatproduction above their Barnett peers by from freezing weather that can shut down Louisiana’s natural gas production had exceeded 2 tcf (56.6 bcm) in 2010 for the first time since 1982. The EIA – a division of the US Department of Energy (DOE) – listed several factors as contributors to the Haynesville surge. It said that drillers and producers in Haynesville had been able to take advantage of what had been learned while developing Barnett to help ramp up production far more rapidly. For example, nearly a decade of shale- focused drilling was needed to reach production of 5 bcf (142 mcm) per day in Texas, using early prototypes of horizontal drilling programmes, whereas the same level was reached in less than three years in northwestern Louisiana, the EIA underlined, as Haynesville operators have been able to tap into that experience. “Technology-driven efficiency gains have enabled the Haynesville producers to reach that level with far fewer wells,” it said. Copyright © 2012 NewsBase Ltd. www.newsbase.com Edited by Ryan Stevenson All rights reserved. No part of this publication may be reproduced, redistributed, or otherwise copied without the written permission of the authors. This includes internal distribution. All reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its contents
  • 6. UOGM 2011 Annual Review page 6 MARCH Moreover, regional infrastructure is remain relatively low, operators are president George Lippman has taken firmalso a key factor, as major expansions to turning their attention to the more issue with the claim, underlining thatthe gas transmission system that have liquids-rich areas of the play, thereby “our data clearly show that the Barnettbeen developed in northwestern reducing the emphasis on gas.” production is still greater than theLouisiana have supported the rising The data from Bentek Energy – an Haynesville production”.natural gas production from the Evergreen, Colorado-based consulting In an e-mail to the Fort Worth-basedHaynesville. Pipeline capacity firm – said that Barnett Shale production Star-Telegram, on March 22, Lippmanexpansions were recently completed on had been maintained at about 5.35 bcf said his firm’s estimates showed Barnettthe Regency, Midcontinental Express, (151.5 mcm) of gas per day in the first production averaging 5.52 bcf (156.3and Gulf Crossing systems, each of several weeks of 2011, but fell off mcm) per day in February, easilywhich transports Haynesville gas. sharply in mid-February before exceeded the output of 5.03 bcf (142.4 recovering to its current level. At about mcm) per day from Haynesville.Characteristics the same time that Barnett production Lippman said his company’sOne of the so-called “Big Four” key was just getting back on line, Haynesville calculations were derived from Texasshale formations in the US – the others production began following a sharp Railroad Commission data, “plus thebeing the Fayetteville, Marcellus and upward trend toward its current peak. most recent data from our GasBarnett shales – the Haynesville According to Matt Marshall, Bentek Processing Plant database that collectsformation is a layer of sedimentary rock senior energy analyst, shale gas daily volumes at the outlet of all gas-more than 10,000 feet (3,048 metres) production in the Fort Worth Basin has processing plants in each region and thenbelow the surface of northwestern been in slight decline since November extrapolates that data back to wellheadLouisiana, southwestern Arkansas and 2010, at the same time as the Haynesville volumes.”eastern Texas, with some of the has entered a strong growth trend. According to the Star-Telegram,formation stretching well across the “Haynesville would have passed the Steven Grape, the Dallas-based domesticnorthern central portion of Louisiana. Barnett in a couple of months anyway if reserves project manager for the EIA, Named after the town of Haynesville these trends had continued,” he told and Gene Powell, publisher of the Fortin Claiborne Parish, Louisiana, and Platts on March 21. Marshall estimated Worth-based Powell Shale Digest, saididentified by geologists 60 years ago, the Haynesville’s current production at on March 21 that the agency neededformation is of a type once considered around 5.62 bcf (159 mcm) per day, further clarification and confirming datatoo costly to explore, but rising energy compared with 5.40 bcf (152.9 mcm) per before it could be assured that theprices and newer technology and day in the Barnett Shale. Haynesville was the new leader.processes have changed that, leading to a Lippman said that although herush of activity as energy exploration Casting doubt expected that Haynesville would surpasscompanies have taken out leases on However, not all market observers are the Barnett in production “in the monthsproperty in north Louisiana. convinced by the Bentek and EIA views ahead ... [it] has not happened yet”. The most active areas in this respect that the Barnett Shale has been eclipsed These comments go to show that shalehave been Caddo, Bienville, Bossier, by the Haynesville Shale as the US’s gas production is something of aDeSoto, Red River and Webster Parishes number one natural gas field. moveable feast where the lead canof Louisiana, plus adjacent areas in At Lippman Consulting, an El Paso- change hands on a regular basis. Somesouth-west Arkansas and east Texas based natural gas consulting firm, industry analysts have predicted thatwhere the shale element of the formation drilling in the Haynesville will probablyis believed to run at its thickest. be on the end of a slowdown similar to The Haynesville – which the Barnett if oil prices remain high andFocus gas prices remain low, while other haveIts rise to prominence has come at a time experts say could hold up highlighted how the severe decline rateswhen drilling in all US shale basins has to 39 trillion cubic feet (1.1 that follow initial shale gas productionincreased tremendously, although Barnett spurts may yet alter the figuresactivity may now be tailing off because trillion cubic metres) of dramatically in the months and yearsof a swing in focus to liquids-rich plays. natural gas – was ahead. The EIA report observes that drilling For the time being, at least, thevolumes have been flattening in the producing around 5.5 Haynesville producers have grabbed poleBarnett as explorers turn their attention billion cubic feet (155.8 position in the US and are likely to leadto US$100 per barrel oil. the “shale gale” peloton into the next It said: “As gas-directed drilling in the million cubic metres) per bend in the route.Barnett slows and natural gas prices day of gas Copyright © 2012 NewsBase Ltd. www.newsbase.com Edited by Ryan Stevenson All rights reserved. No part of this publication may be reproduced, redistributed, or otherwise copied without the written permission of the authors. This includes internal distribution. All reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its contents
  • 7. UOGM 2011 Annual Review page 7 APRILNew acreage awards boostIndonesia’s CBM sectorThe signing of nine CBM production-sharing contracts has provided a major boost toIndonesia’s flagging oil and gas industryBy Kevin Godier Together the PSCs account for investment of US$42.55 million Four of the contracts involve BP ventures in the Barito basin of South Kalimantan Over 30 CBM PSCs have been granted by the Indonesian government since 2008The Indonesian government has signed Indonesia holds a potential 453 trillion potential operators, while those for thenine new production-sharing contracts cubic feet (12.83 trillion cubic metres) of remaining six blocks were decided in(PSCs) in its coal-bed methane (CBM) CBM reserves in-place, more than auctions. The three directly offeredsector, four of which involve BP ventures double the country’s natural gas reserves, blocks are: the Tanjung IV block inin the Barito basin of South Kalimantan. according to a 2004 estimate by Stevens Central Kalimantan, which was awarded Indonesian Energy Minister Darwin and Hadiyanto. to a consortium of PHE Metana TanjungZahedy Saleh announced the PSCs on The commitments by BP – which has IV and BP Tanjung IV; the Muara EnimApril 1 and said the nine contracts in over 35 years of experience in Indonesia II block in South Sumatra, which wasKalimantan and Sumatra would help to and is one of the largest foreign investors awarded to a consortium of PHE Metanarevive flagging investment in Indonesia’s in the country – will be seen as a Sumatera 5, Metana Enim Energi andoil and gas sector. Together, the contracts particular boost for Jakarta in this Indo CBM Sumbagsel 2, and the Muaraaccount for investment of US$42.55 respect. Enim Block III, which went to amillion with a total signature bonus of “BP has significant experience and consortium of PHE Metana Sumatera 4US$11.3 million across the nine blocks. expertise in the development of and Baturaja Metana Indonesia. Illustrating the momentum that is unconventional gas, including CBM, and Three of the six auctioned blocks – thebuilding in the CBM industry in coal-rich we look forward to working with our Kapuas I, Kapuas II and Kapuas IIIIndonesia, the deals were announced on partners to apply this to the potential of blocks – are located in Centralthe same day that Dart Energy said it had Indonesia’s coal resources,” said BP’s Kalimantan. These were awardedproduced first gas from its SCBM-1 well CEO, Bob Dudley. respectively to: a consortium ofat the Sangatta West project in East Another PSC participant, Pertamina Transasia CBM and BP Kapuas I; aKalimantan. It is believed to be the first Hulu Energi (PHE), has emphasised that grouping of Kapuan CBM Indonesia anddedicated CBM well to produce gas from the contracts demonstrate support for BP Kapuas II, and a consortium of Gasa PSC in Indonesia. Indonesia’s push to develop alternative Methan Utama and BP Kapuas III. One of the reasons for growing interest energy resources to curb the country’s The remaining three blocks comprised:in CBM in Jakarta is the soaring dependence on crude oil and the Kutai Timur block in Eastdomestic demand for natural gas, which conventional gas. “We hope that this Kalimantan, won by a consortium ofhas made it difficult for Indonesia to strategy [developing CBM] can tackle Senyiur CBM and Total E&P Kutaimaintain and expand its exports of the gas supply shortfall,” said PHE’s Timur; the Kutai Barat block, also in theliquefied natural gas (LNG) in recent president, Dwi Martono, in a press same province, won by Gas Methanyears. release. Abadi, and the Sijunjung block in West Sumatra, awarded to a consortium of IntiJakarta’s jackpot Nine blocks Gas Energi and Bukit Asam.Over 30 CBM PSCs have been granted Of the nine CBM blocks, three wereby the government since 2008. These directly offered by the government to BP pushinclude exploration commitments of From BP’s perspective, the new PSCsaround US$150 million over the next add to its existing operations inthree years as Jakarta pushes harder to The commitments by BP Indonesia, including the Tangguh naturaldevelop its unconventional gas resources. will be seen as a particular gas project in West Papua. boost for Jakarta Copyright © 2012 NewsBase Ltd. www.newsbase.com Edited by Ryan Stevenson All rights reserved. No part of this publication may be reproduced, redistributed, or otherwise copied without the written permission of the authors. This includes internal distribution. All reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its contents
  • 8. UOGM 2011 Annual Review page 8 APRIL Eventual gas output from the block is to be sold initially to the local market under a deal similar to that for Sangatta West. Other initiatives under way in Indonesia attest to the country’s awakening of its unconventional gas potential. Houston-based Contractor Core Laboratories and Indonesia’s upstream oil and gas regulator BPMigas have commenced a study into the shale gas potential in Sumatra and Kalimantan in Western Indonesia, after indications from the Bandung Technology University that the country has around 1,000 trillion cubic feet (28.3 trillion cubic metres) of shale gas reserves in place. The participation of the UK major will be – and whether the gas extracted Reports have said that ministers arecomes shortly after its striking of can be sold outside the lower-margin hoping to offer blocks for shale gasagreements to access new gas resources Indonesian market – remains to be seen. evaluation and exploration by the end ofin China, India and Australia, and also But the bigger point is that Indonesia the year, with a target of signing the firstfollows the company’s CBM joint appears to be on the verge of joining co-operation agreement to exploit shaleventure in Indonesia with Eni and VICO, other markets where the CBM industry gas in 2012. Indonesia’s Energy Ministrywhich in late 2009 was awarded a has made spectacular strides, notably the has also started a study into the shale oilcontract at Sanga Sanga near the Bontang US, Canada, Australia and China. potential on Buton Island in south-eastLNG plant in East Kalimantan. The authorities in Jakarta will have Sulawesi. BP currently produces about 650 been especially encouraged by the news Indonesia’s growing interest in itsmillion cubic feet (18.4 million cubic from Dart Energy’s SCBM-1 well, which unconventional resources is inevitable,metres) per day of gas in the San Juan is the first of four pilot wells planned for given the natural depletion of its maturebasin in Colorado, which is currently its Sangatta West, having been drilled last oilfields, from which crude andsole CBM-producing operation. The month to a depth of 830 metres. condensate output has fallen from peaksIndonesian activity suggests the UK giant Dart said that well testing over the next of above 1.5 million barrels per day inis now branching out in its pursuit of two to three months would determine the 1970s to 947,000 bpd in 2010.CBM acreage around the world. production and reserves potential, once a Indonesia was also formerly the Together the four Indonesian PSCs stabilised gas flow is achieved, and that world’s second largest gas exportercover an area of approximately 4,800 gas produced from the Sangatta West behind Qatar, but has been overtaken bysquare km. BP said it had committed to pilot holes would initially be sold under Malaysia after recent declines in itsspend US$15 million on seismic an approved gas-to-power scheme to the output owing to a decrease in productionexploration and surveying over the next local grid. from the Arun LNG plant in Aceh andthree years and might begin production Dart is the joint operator of the the rising use of natural gas at home towithin that period. BP will hold a 44% Sangatta West CBM PSC with Ephindo avoid costly imports and dwindlingparticipating interest in the Tanjung IV Energy, each firm holding 24%, while domestic supply.PSC and co-owner Pertamina will hold Pertamina holds the remaining 52%. BP’s willingness to dip its toes in onethe remaining 56%. Its stake in the three Also in Indonesia, Dart said a joint of the world’s largest and most under-other PSCs will be 45%, alongside operating agreement for the Tanjung explored CBM resources will ensure thatentities all controlled by Sugico, a Enim PSC has been signed by all parties, other global energy giants followJakarta-based mining company. enabling the first exploration well on the progress in Indonesia’s CBM sector How successful the nine new ventures Sumatra block to be spudded shortly. closely. Copyright © 2012 NewsBase Ltd. www.newsbase.com Edited by Ryan Stevenson All rights reserved. No part of this publication may be reproduced, redistributed, or otherwise copied without the written permission of the authors. This includes internal distribution. All reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its contents
  • 9. UOGM 2011 Annual Review page 9 MAYFractious fracking debate explodesin wake of Pennsylvania blowoutEnvironmental groups are on the offensive against the unconventional gas industry afterthe recent blowout at one of Chesapeake Energy’s wells in PennsylvaniaBy Kevin Godier The blowout led to thousands of gallons of drilling fluid seeping into local waterways Chesapeake shut down all of its fracking operations in Pennsylvania and West Virginia following the incident The US government is under pressure over plans to develop oil sands and oil shale in the west of the countryThe environmental spotlight on North reached a salinity level inappropriate for stretches from West Virginia to NewAmerica’s unconventional oil and gas consumption owing to drillers’ use of York.industries has intensified recently after a chemicals in the fracking process. Chesapeake, which had 87 active wellsblowout at a natural gas well in Against this backdrop, the shale gas in Pennsylvania in the second half ofPennsylvania. The incident led to producers are looking to expand drilling 2010, said the accident was caused by athousands of gallons of drilling fluid to new parts of the US. But they will be broken piece of equipment. Whileseeping into local waterways and braced for a barrage of criticism after the industry commentators suggested that theintensified debate about the threat of blowout at Chesapeake Energy’s well in incident could hurt Chesapeake’swater contamination posed by the Pennsylvania on April 19. reputation for safety and could lead tohydraulic fracturing (fracking) process. The accident in LeRoy Township, just calls for stricter regulation of shale Elsewhere, the US Bureau of Land south of the New York State border, drilling in Pennsylvania, the companyManagement (BLM) has come under reportedly spilled thousands of gallons of stressed that its emergency responsepressure from environmental groups in water and chemicals into the nearby procedures and the design of the well siteUtah, Colorado and Wyoming after Towanda Creek and forced the temporary combined to minimise the amount oflaunching discourse on opening up large evacuation of nearby families. Workers fluid spillage.swathes of the states to oil shale and oil were able to contain the spill by April 20 “We spend our time focused onsands development. Environmentalists and regained permanent control of the ensuring that we have safe andare using ongoing hearings in Utah to well on April 25. Nobody was injured in environmentally responsible operations,”lobby the BLM against sanctioning such the incident and the Pennsylvania Chesapeake said in a statement. “If youdevelopment. authorities said the environmental impact take care of those two critical issues, appeared to have been minor. Yet the reputation will take care of itself,” saidFractious debate events have further heightened the the statement, which stressed thatFor the time being, the most contentious scrutiny on gas drilling in the Marcellus Chesapeake said it had had a well-controldebate surrounds the extraction of shale shale, the gas-bearing rock formation that specialist on the scene in 30 minutes.gas and the threat this poses to water “There was no delay in response ortables and the atmosphere. In Texas, a shortage of expertise throughout,” itpending fracking disclosure bill would emphasised.require drillers to disclose their array of Chesapeake, the second biggest US gaschemicals, while another would require producer after ExxonMobil, hasthem to use ‘tracer’ fluid in the liquid nevertheless elected to shut down all ofthey use for fracking, so that the industry its fracking operations in Pennsylvaniawould not face false claims of and West Virginia until it ascertains whatgroundwater pollution. went wrong in LeRoy Township. Elsewhere, the boom in the Marcellusshale has led to claims of contaminated IMAGE: Marcellus shale gas drillingwater, especially in Pittsburgh, where tower in Pennsylvaniareports claim water in some areas has Copyright © 2012 NewsBase Ltd. www.newsbase.com Edited by Ryan Stevenson All rights reserved. No part of this publication may be reproduced, redistributed, or otherwise copied without the written permission of the authors. This includes internal distribution. All reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its contents
  • 10. UOGM 2011 Annual Review page 10 MAY The US Environmental Protection and development. One environmental NGO, LivingAgency (EPA) has asked for details, The first of seven hearings began on Rivers, is currently challenging Utah’sincluding sources of the discharge and April 26 in Salt Lake City, Utah, approval of a proposed commercial oilthe extent of environmental damage. The following a decision by US Interior sands project at the PR Springs mine inEPA is conducting a two-year study on Secretary Ken Salazar to take a fresh the Uinta Basin, which would be the firstthe safety of fracking and its impact on look at a federal oil shale plan covering of its kind in the US.drinking water. Initial results of the peer- Utah, Wyoming and Colorado that was The group contends the scheme wouldreviewed study are expected in late 2012. released in 2008 by the Bush dig up fragile topsoil, destroy limestone In addition, Pennsylvania’s administration. plateaus formed over thousands of yearsDepartment of Environmental Protection Hearings on the plans were due to be and pollute groundwater downstream thathas sent the company a “notice of held in Wyoming on April 29 in Rock flows into the Colorado River. Livingviolation,” representing the first step in Springs and on May 5 in Cheyenne, and Rivers filed a complaint with the state,enforcement proceedings and marking in Colorado on May 3 in Rifle and on claiming that the Utah Division of Waterthe 58th notice of violation for May 4 in Denver. Quality has not accurately assessed theChesapeake in Pennsylvania since 2008, Environmentalists have expressed potential for widespread environmentalthe third highest figure amongst concern not only about the impact of damage.Marcellus operators. mining in Utah’s San Rafael Swell and US President Barack Obama is Most of those violations were minor, the scenic Book Cliffs area, but also the generally supportive of developinghowever, and did not result in potentials risks to air quality and water domestic unconventional oil and gasenvironmental damage. Chesapeake has supplies downstream. resources in order to curb his country’ssaid in April that it will henceforth “The scoping process is designed to reliance on imported energy. Indeed,disclose the chemicals it uses on all of its explain to the public what we’re about to Obama has made natural gas thefracking jobs. do and gather their input early on,” said cornerstone of his energy policy. But Mitch Leverette, chief of the BLM’s despite support from the government, itSalt Lake City rumbles Solid Minerals Division. “Based on their is clear that unconventional energyOne the other side of the US, the BLM is comments, we hope to offer a range of developers in the US will continue toexamining whether as much as 1.9 alternatives in the final report,” he said, face pressure from environmental groupsmillion acres (7,690 square km) should quoted on April 28 by Associated Press. until they can prove that the drillingbe made available for commercial oil A draft of the BLM report is due to be processes they use are both safe andshale projects and also whether more completed by late September, and the clean.than 400,000 acres (1,618 square km) final report completed by Decembershould be opened up for oil sands leasing 2012, he said. JUNEShale investments continue inNorth American gas islandCash continues to pour into shale gas opportunities in the US and Canada, despite theprospects for exports diminishingBy Ed Reed ExxonMobil has affirmed its XTO shale gas position, acquiring two Marcellus-focused companiesThe unprecedented boom in shale gas in report from the Paris-based group said America, based on liquefied natural gasNorth America will have a worldwide the US and Canada would remain largely (LNG).impact, according to the International isolated from the global gas trade – aEnergy Agency (IEA). However, a new blow to hoped for exports from North Copyright © 2012 NewsBase Ltd. www.newsbase.com Edited by Ryan Stevenson All rights reserved. No part of this publication may be reproduced, redistributed, or otherwise copied without the written permission of the authors. This includes internal distribution. All reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its contents
  • 11. UOGM 2011 Annual Review page 11 JUNE Despite this projected lack of export become significantly more gas-focused. strong competitive pressure to movecapacity, companies are continuing to The ExxonMobil deal in the Marcellus prices towards costs, North Americainvest substantial sums in opportunities will provide reassurance for other should play only a minor role in netin the US and Canada. The most recent, companies, as there has been increasing global LNG trade.”ExxonMobil, has struck a deal to acquire talk of an investment “bubble” in shale While a number of plans have beentwo companies focused on the Marcellus gas, with leasing prices rising while hub mooted on exports from North America –shale. prices remain low. with liquefaction plants planned for both Unconventional gas production in The IEA reported that seven the US Gulf Coast and Canada’s WestNorth America, under the IEA’s transactions in North America in 2010 – Coast – the extent to which this will bepredictions, will increase from 360 not including the XTO deal – carried followed through remains unclear andbillion cubic metres in 2008 to 670 bcm price tags of US$1-5 billion. This year, not everything will come to fruition.in 2035, making up around two thirds of significant deals have focused on the In addition, while the ability of LNGthe total output. Montney shale, in Canada, where export capacity has been cited as a means PetroChina committed US$5.4 billion in of hiking local gas prices – in effectMarcellus move February to a venture with EnCana and, opening North America up to globalExxonMobil, which took a substantial earlier this month, Petronas struck a pricing – the impact is likely to beshale gas position through its US$41 US$1.1 billion deal with Progress limited. Gas in Western Canada that isbillion acquisition of XTO Energy in Energy. being considered for export, for instance2010, has committed US$1.7 billion to via the Kitimat LNG plant, is strandedbuy Phillips Resources and TWP, both Gas island and will not play a role in meeting localbased in Pennsylvania. The two Some commentators have pinned further demand. Infrastructure challenges will becompanies are to be incorporated into the growth in shale gas developments on the significant in building these plants.XTO unit. ability to export this feedstock, but recent Plans for export capacity in the Gulf The deal, which completed on June 2, research suggests this may not happen to Coast, meanwhile, face a number ofwill involve ExxonMobil taking the extent hoped. obstacles and analysts have predictedownership of around 317,000 acres The IEA’s recent report, “Are we output will only reach 1-2 billion cubic(1,282 square km) in the Marcellus. entering a golden age of gas?” was feet (28-57 million cubic metres) per dayUnder the transaction, ExxoMobil will released last week and set out a new by 2017, which will be insufficient toadd around 228 billion cubic feet (6.46 scenario under which production of the turn around the local glut.billion cubic metres) equivalent of feedstock would increase beyond A number of new LNG plants areproven gas reserves and around 50 previously held expectations. In North planned around the world, particularly inmillion cubic feet (1.42 million cubic America, it said, “unconventional gas Australia, which was picked out by themetres) per day of production. helps domestic production keep pace IEA as potentially challenging Qatar’s A note from Tudor Pickering Holt said with increasing demand in the [new] position as top producer by 2020.the deal appeared attractive for the scenario. Overall, the region will In addition, the impact of shale gaspurchaser, with below-average pricing of maintain its status as a marginal net development in other countries will alsoaround US$5,000 per acre (US$1.25 importer [as a result of Mexico],” to have an effect on liquefaction plans.million per square km) and that the 2035 and “will remain relatively isolated China, for instance, is assessed assouth-west Pennsylvania assets were “in from the other gas markets.” holding the world’s largest shale gasa good zip code.” The brokerage note While prices in the US and Canada are reserves. The Asian state will continue tosaid, following this deal, ExxonMobil’s likely to remain low, with “mechanisms be reliant on gas imports but Northtotal Marcellus acreage was around in these countries continuing to apply American LNG supplies will face700,000 acres (2,830 square km). competition from a number of sources ExxonMobil – and the other large and are likely to be at the higher end ofenergy companies – are becoming ExxonMobil’s deal in the world prices.increasingly reliant on gas reserves andproduction to prop up their company Marcellus will provide Domestic consumptionstatistics. In February, ExxonMobil said reassurance for other While export opportunities are limited,53% of its proven reserves were gas, the IEA’s new scenario suggests therewith the remainder liquids. While it companies, as there has may be substantial demand increases inmanaged to replace around 100% of its been increasing talk of an the US. The “golden age” report predictsliquids production in 2010 it added a US demand could be nearly 790 bcm bysubstantial amount of gas – 328% of its investment “bubble” in 2035, up by 18% against previousprevious production, or 2.6 billion barrels shale gas scenarios.of oil equivalent – suggesting it will Copyright © 2012 NewsBase Ltd. www.newsbase.com Edited by Ryan Stevenson All rights reserved. No part of this publication may be reproduced, redistributed, or otherwise copied without the written permission of the authors. This includes internal distribution. All reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its contents
  • 12. UOGM 2011 Annual Review page 12 JUNE This growth will come from power generation and transportation, with coal demand falling by 9% and oil by 6% by 2035. Coal’s share of electricity generation falls from 49% in 2008 to 30% in 2035, under the new scenario, with gas moving up to 27% of demand in that timeframe. ExxonMobil’s deal suggests continued confidence in domestic prospects and demand. While exports look unlikely, increased consumption will ensure there is a place for further investments in shale gas. Some prices being paid by other companies look too high – but shale gas will likely only become a more important part of North America’s energy mix. JULYThe Franco fracking furoreFrance’s decision to ban fracking will have a major impact on companies that areexploring shale deposits in the country and the wider unconventional oil and gas industryBy Kevin Godier Companies operating in France with fracking permits will have them revoked, according to new legislation Firms with shale drilling permits have two months to notify the state what extraction technique they use Companies that could suffer include Toreador Resources, Vermilion Energy and Schuepbach EnergyFrance recently sounded a major warning French Gazette in early July to become had supported, would have banned anyto the unconventional hydrocarbons law. “We are at the end of a legislative kind of development of the deposits.industry, after it became the first country marathon that stirred emotion from As things stand, companies thatto ban the use of hydraulic fracturing lawmakers and the public,” French currently own permits for drilling in oil(fracking) in drilling for natural gas and Environment Minister Nathalie shale deposits on French land will haveoil. Kosciusko-Morizet said on June 30 two months to notify the state what French senators voted to ban the before the vote. Parliament would have extraction technique they use. If theycontroversial practice on June 30, to vote for a new law to allow research admit to the use of fracking, or if theymeaning that oil and gas companies using the technique, she said. fail to respond, their permits willoperating in France with fracking permits The vote was divided along party lines, automatically be revoked.will have them revoked according to the with the ruling centre-right UMP partylegislation, passed by a 176 to 151 vote. voting in favour and the opposition French resistanceHowever, Paris-based explorer Toreador voting against the bill, according to Le The French bill, which was proposed atResources said it would continue to work Monde. The Socialist Party opposed the the end of March by the leader of theto develop shale resources in the Paris bill because it did not go far enough, UMP’s parliamentary majority, cameBasin, in which it holds the most acreage arguing that it left open possible after environmentalists and Green Partyof any explorer. loopholes and that it would not prevent activists rallied together to provide robust The bill had earlier passed the National the exploitation of shale oil deposits by opposition to shale exploration in theAssembly, the country’s lower chamber, techniques other than fracking. An earlier country.on June 21, and was published in the version of the bill, which the Socialists Copyright © 2012 NewsBase Ltd. www.newsbase.com Edited by Ryan Stevenson All rights reserved. No part of this publication may be reproduced, redistributed, or otherwise copied without the written permission of the authors. This includes internal distribution. All reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its contents
  • 13. UOGM 2011 Annual Review page 13 JULY Before the bill’s passage into law shale in earnest in Europe in Poland. for all stakeholders, in compliance withgas drilling was still at the development France’s fracking ban also comes at French legislation and through co-stage in France. The country has the same time that the New Jersey State operation with French authorities.”abundant shale gas and oil reserves, with Senate has voted to ban the practice, over Toreador decided to focus on itsthe most promising drilling area for gas fears that it could contaminate drinking French portfolio in 2009, offloading itscovering 10,000 square km in the water. interests in other countries and staking itssoutheast. France opened its doors to future on the success of shale drillingshale gas exploration in March 2010, Toreador near Paris, where it also holdswhen former Environment Minister Jean- Although the new French bill will come conventional oil assets. In May 2010, theLouis Borloo granted three permits for as a major blow to unconventional gas arrival of US integrated independentperiods between three and five years. The explorers, one entity that claims to be Hess into the acreage held by Toreador inmove was seen to have been heavily unaffected in the near term is Toreador the Paris Basin delivered a very seriousinfluenced by the so-called “shale gas Resources. The company sold its assets US$120 million of financial firepower torevolution” in the US, which has helped in Turkey, Hungary and Romania and the venture, which was intending tothat country reduce its dependence on moved its headquarters to Paris from conduct shale oil exploration drilling inimported energy and has eased prices Dallas in 2009 to focus on developing the town of Doue (Seine-et-Marne) afterwhile providing a fuel that burns more shale oil in the Paris Basin. The company April 15, 2011, under a data capture-cleanly than oil or coal. However, since has estimated oil reserves in the basin at oriented first phase of a two-phase workFrench oil and gas giant Total announced 65 billion barrels. Toreador’s CEO, Craig programme.it wanted to start exploring for shale gas McKenzie, said in a statement on July 6 McKenzie told UOGM last year thatin the country’s southern region, that the company’s initial evaluation extra processing capacity at Total’spoliticians and environmentalist groups activity at its Paris Basin licences would Grand Puits refinery in the middle of thehave clamoured to halt exploration not involve fracking. Paris Basin was a major selling point forbecause of the perceived impact that “It is important to note that our plan to Hess, which saw key similarities betweenshale gas exploration techniques can evaluate our exploration licences does Paris Basin shale and the Bakken shale inhave on the environment, in particular not call for hydraulic fracturing,” the US, where it is proposing to investthe risk to water quality and the threat of McKenzie said. “We will not conduct about US$1 billion per year over the nextlandscape disfiguration. Total has hydraulic fracturing operations within five years. McKenzie stressed at the timeclaimed its Montelimar shale acreage in any of our permit areas. We will make that the geology of the Paris Basin – insouthern France could hold as much as full disclosures and representations to the which there is some 2,000 metres of2.38 trillion cubic metres of gas. French regulatory authorities as may be separation between the shale and the required.” He went on to say that freshwater strata – would avoidFranco fracking Toreador’s work would not stop because contamination problems experienced inThe clamour over fracking ramped up of the ban. “Notwithstanding the new the US’ Marcellus shale, which is closemarkedly during the first half of 2011, law, we believe the oil resource potential to freshwater aquifers. Given the lack ofplacing France at the centre of the wider of the Paris Basin can create jobs, alternatives to fracking to extract oil outdebate in Europe about the dangers of the provide local economic development, of shale, Toreador’s medium-termtechnique. And now it seems that generate substantial revenues for the state strategy remains to be divulged. SomeFrance’s position is having an influence and benefit all stakeholders ... We analysts have suggested that the companyon other countries and their respective reaffirm our commitment to define and could participate in scientific researchapproaches to the fracking issue. develop this basin to reach its potential into shale gas exploration that French A UK House of Commons select Prime Minister Francois Fillon hascommittee has called for an investigation favoured, so as not to rule outinto the link between shale gas tests in technologies that do not harm thenorthwest England and two minor environment.earthquakes that occurred in the areashortly after operations started up. As a United frontresult, the Dutch Ministry of Economics, Other explorers that have won permitsAgriculture and Innovation has said there and are affected by the ban includecan be no green light for shale gas Calgary-based Vermilion Energy, whichexploration in the Netherlands until has drilled two wells in the Paris Basin,results from the UK government and Schuepbach Energy, which has beeninvestigation can be assessed. looking to bring in GDF Suez as its Certain parts of Germany have also partner in southern France.banned fracking, which has only begun Copyright © 2012 NewsBase Ltd. www.newsbase.com Edited by Ryan Stevenson All rights reserved. No part of this publication may be reproduced, redistributed, or otherwise copied without the written permission of the authors. This includes internal distribution. All reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its contents
  • 14. UOGM 2011 Annual Review page 14 JULY GDF Suez’ CEO, Gerard Mestrallet, France’s large nuclear power industry demonstrated our expertise and ability tohas insisted that shale gas exploration is gives it far less incentive to explore new conduct our Paris Basin operations in full“a matter of national interest,” but all the approaches compared with other respect of the environment and localindications are that France is united countries like Poland, where tapping into residents where we operate,” McKenziebehind the fracking ban. shale reserves has become a national said. But bringing his company’s plans to Meanwhile, Kosciusko-Morizet has priority to win independence from fruition may now depend on a hugetalked publicly of the “devastated Russian gas imports. reserves find, and a consequentcountryside” and “sullied water tables” in On the face of it, Toreador is not reconsideration of the ban by the FrenchUS regions where fracking has occurred. giving up on its core strategy. “As a authorities.There is also a widespread view that longstanding operator in France, we have AUGUSTShale offers NorthAfrica alternativesUnconventional resources are on the up in North Africa as the region looks to drum upfresh interest in its energy potentialBy Christopher Coats Algeria is struggling to find investors in conventional projects but has signed up Eni for shale gas work Early-stage projects are under way in both Morocco and Tunisia Concerns continue over the impact of fracking but a recent US report provides support for the practiceAs the Maghreb states work to re- the last licence round, only two of the 10 gas potential.organise their energy sectors amid available permits were awarded, onepolitical and economic transitions, many going to Spain’s Cepsa and the second to Oil shaleare looking to the area’s shale potential Sonatrach. Meanwhile, in Morocco, where domesticas a viable, if controversial, path forward. Over the last 12 months, though, the energy resources have remained elusive Barring Libya, where civil strife has government and Sonatrach have sought for the leadership of King Mohammadled to a virtual halt to all exploration and to encourage shale development in the VI, one company has plunged into the oilproduction, the region has turned its country, culminating with an agreement shale business.attention towards exploiting its with Italy’s Eni to take the lead in the Following four years of testing, andunconventional potential to bolster coming year. coming in the latter half of a three-yearexisting resources and diversify sources For its part, Algeria represents an memorandum of understanding (MoU)of supply. opportunity for Eni to compensate for with the government of Morocco, UK- In locations such as Algeria, the lost production in the region that resulted based San Leon Energy announced thispromise of shale projects offers a chance from its heavy investment in month that it was ready to beginto rejuvenate an energy industry wracked neighbouring Libya over the past two production at a site in the southern partwith controversy and setbacks. This decades. After investing billions of of the country.comes after two years of waning interest dollars, with the aim of securing a San Leon, which is working on thefrom foreign investors and domestic substantial resource base close to home, Tarfaya oil shale field pilot project,investigations into widespread corruption the violent conflict that has raged in arrived in the country at the same time asat the state-owned Sonatrach. Libya for the last few months has cast a Brazil’s Petrobras. The UK minnow has The impact of the corrosive pall over projects. so far been able to complete two wells,atmosphere and increasingly The Algerian agreement, signed at the has set up an operational base camp andunfavourable conditions for foreign end of April, will allow joint projects is on the verge of spudding a thirdcompanies has led to a sharp drop in between Eni and Sonatrach to seek out well.interest from international firms. During what has been called a significant shale Copyright © 2012 NewsBase Ltd. www.newsbase.com Edited by Ryan Stevenson All rights reserved. No part of this publication may be reproduced, redistributed, or otherwise copied without the written permission of the authors. This includes internal distribution. All reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its contents
  • 15. UOGM 2011 Annual Review page 15 AUGUST Argentina. Much of this new enthusiasm comes as companies and countries alike seek to repeat the results witnessed in the US, whose unconventional resource now provides 30% of supply. However, progress has not been without controversy, as critics have cited the environmental impact of the process of fracking as being a reason for slowing shale projects. While Europe has seen such opposition result in moratoriums and outright bans on fracking, North Africa has not yet witnessed such public or political opposition. That said, opposition in South Africa to work in the Karoo Regional analysts and government beginning of the year, Perenco said none Basin has been notable and it may wellofficials, who have boasted of the of its operations would be hindered by be that recent changes in government incountry’s shale potential but have so far the political transition and that it Tunisia may play into this environmentalshown little in the way of actual intended to continue its shale efforts trend.progress, have welcomed the alongside its existing natural gas Supporters of such shale movementsannouncement that production will soon projects. outside the United States receivedstart. The company has had some success in impetus this week with the release of a hydraulic fracturing on its El Franig field study commissioned by the USShale gas and, if production begins, this will mark government to assess the viability andTunisia, despite the unrest which led to the first shale gas project brought environmental impact of shale projects.the removal of its president, Zine el onstream in North Africa. While the report went on to suggest aAbidine Ben Ali, after three decades, This recent spate of new shale projects number of new policies related toappears to be continuing its own shale in North Africa comes as a part of a minimising the environmental impact ofefforts with the aid of France’s Perenco much larger wave of similar efforts fracking, it appears to advocateand Canada’s Cygam. across the globe, spurred by reports of expanding shale projects in the US and In an operational update at the enormous shale potential from China to abroad. SEPTEMBERChesapeake upbeat about UticaChesapeake Energy’s CEO believes oil and gas reserves in the Utica shale could be worthUS$500 billion and has urged speedy development of the formationBy Kevin GodierThe emerging Utica shale in North worth half a trillion US dollars. recently predicted that the whole playAmerica continues to make headlines, Chesapeake has so far spent US$2 “could be worth US$500 billion,” muchwith Chesapeake Energy forecasting that billion on its Utica acreage, and the of which would be extractable from thehydrocarbons in the formation could be company’s CEO, Aubrey McClendon, eastern Ohio section of the formation. Copyright © 2012 NewsBase Ltd. www.newsbase.com Edited by Ryan Stevenson All rights reserved. No part of this publication may be reproduced, redistributed, or otherwise copied without the written permission of the authors. This includes internal distribution. All reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its contents
  • 16. UOGM 2011 Annual Review page 16 SEPTEMBER McClendon suggested that activity in surrounding the play. US$4,000 per acre, around eight timesthe Utica in the years to come could be Nevertheless, producers are cautiously the rates at the start of the year. “If youthe “biggest thing economically to hit optimistic that advances in technology say it’s worth US$15-20 billion, you’reOhio since maybe the plough.” utilising multi-stage hydraulic fracturing saying it’s a home run,” said Nikhanj, as Speaking at an industry event in Ohio (fracking) and horizontal drilling quoted by the Wall Street Journal onon September 21, McClendon admitted techniques can unlock the play’s August 6.that fluctuating commodity prices made potential. Chesapeake said the US$2 billion itit difficult to estimate the value of the had spent on drilling rights on its 1.25reserves in the Utica shale with any Results million acres (5,059 square km) inprecision, but described his estimate as As part of its second-quarter report, eastern Ohio could now be worth 10“reasonable,” according to a report by Chesapeake noted successful results from times that much, now that it has drillingNatural Gas Intelligence (NGI). six horizontal and nine vertical wells results. “The Utica should emerge as a drilled in its Utica shale holdings. key driver in the future growth of USInteresting figure Based on its proprietary geoscientific, energy supplies,” said McClendon duringAlthough the US$500 billion estimate is petrophysical and engineering research a July 29 conference call with investors.speculative and by no means a scientific during the past two years, it said that itsanalysis, it is an interesting figure, as it is “industry-leading 1.25 million net Utica interestamong the first to have been offered for leasehold acres (5,059 square km) in the Speculation that Chesapeake wasthe fledgling Utica, which is a deeply Utica shale could be worth US$15-20 targeting the Utica came when theburied rock formation that sprawls below billion in increased value to the Oklahoma City-based firm purchasedparts of eight states stretching from company.” Analysts at Baird Equity around 500,000 net Appalachian acresTennessee to New York in the US and Research said at the time that the results (2,023 square km) from privately-heldthe provinces of Quebec and Ontario in constituted an implied acreage valuation Anschutz Exploration in late 2010. “WeCanada. of US$12,500-16,667 per acre. started to look at Utica in Ohio here Explorers have suggested that the The Chesapeake announcement – about two years ago and arrived at tworichest oil reserves in the formation lie in aligned with a disclosure from Devon conclusions: One, it’s big: two, a lot ofeastern Ohio. Energy that it had acquired 110,000 acres the acreage on it was owned by In its financial results for the second (445 square km) in the region and EnerVest,” McClendon said last week,quarter of 2011, released in late July, planned to drill three wells there this year referring to the leading conventional oilChesapeake said it believed the liquids- – added encouragement to growing hopes producer in Ohio.rich Ohio section of the Utica to be more that the Utica shale would produce a Chesapeake and EnerVest recentlythan just economically viable. It said the significant and cheap new source of oil. formed a joint venture to explore theshale “is likely most analogous, but According to comments made by Utica, but each firm is also exploringeconomically superior to, the Eagle Ford Manuj Nikhanj, head of energy research outside of that joint venture. ChesapeakeShale in South Texas.” at trading house Investment Technology has so far drilled 15 Utica wells this year, Chesapeake stressed that both plays Group, the disclosures had helped propel prompting it to say it would expand thehad dry gas, wet gas and oil windows, lease prices in the Utica to about number of rigs working there from fiveallowing the overall play to remain to 40 by the end of 2014.economic even at times when oil or It should raise its rig count to eight bynatural gas prices were depressed. the end of 2011 and reach at least a range Unlike the Eagle Ford, the Utica is still of 16-20 rigs by the end of 2012.too new to measure, McClendon said. Chesapeake intends to drill as many as“We know it’s big. How big is big? We 12,500 wells in the Utica and McClendondon’t know and I can’t put volumes on it expects around 10 companies to competeyet,” he said. in the play, investing as much as US$200 One estimate has estimated 20 trillion billion in Ohio over the next 20 years. Hecubic feet (566 billion cubic metres) of said Ohio should have more than 100 rigsnatural gas in the Utica shale, which is in the Utica once full capacity is reached.believed to offer some unique Illustrating the growing momentum,exploration and extraction challenges, CONSOL Energy and Hess Corporationincluding a higher carbonate content and recently formed a joint venture in thelower clay mineral count than the Utica and Anadarko PetroleumMarcellus shale, as well as significant Corporation is in the process of obtainingdepth and a lack of information drilling permits. Copyright © 2012 NewsBase Ltd. www.newsbase.com Edited by Ryan Stevenson All rights reserved. No part of this publication may be reproduced, redistributed, or otherwise copied without the written permission of the authors. This includes internal distribution. All reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its contents
  • 17. UOGM 2011 Annual Review page 17 SEPTEMBER Chesapeake said in July that it planned unashamedly enthusiastic proponent of that Chesapeake’s “plan” involvedto mirror its strategy with its other shale fracking. Maintaining his stance as the increasing jobs, lowering the cost ofplay acreage, by using joint ventures shale industry’s most aggressive energy and helping the US becomeand/or other monetisation alternatives, promoter, he told opponents of fracking energy-independent. Responding to thewith at least one transaction likely to be that he was “the biggest fracker in the argument that energy supply shouldcompleted by the fourth quarter of 2011. world” as he entered the Ohio auditorium come from renewables, he said: “It’s not last week. reality. It can’t happen.”Frack star “I’ve done it 16,000 times since 1989Unsurprisingly, McClendon is an and I’m proud of it,” he said, explaining OCTOBERUCG potential couldmatch shale gasUnderground coal gasification could follow shale gas and be the next step in theunconventional energy revolution, according to a new reportBy Kevin Godier A new study by Zeus Development highlights the cost advantages of UCG Ten new UCG projects have been announced this year, meaning 51 are under way around the globe The environmental impact of the technology has the potential to derail its large-scale applicationThe impact of underground coal Zeus analyst, Chris Cothran, who was a The science bitgasification (UCG) technology on the co-author of the study. “We believe it UCG involves pumping air or oxygenworld energy map could be as significant will be applied most extensively in underground to gasify coal in situ intoas the shale gas revolution, a new study countries such as India, China, Pakistan synthesis gas, which is then pumped tohas claimed. and Bangladesh, where governments the surface. This avoids the costly Energy research and consultancy group have unmineable reserves and are keen to energy, labour and the infrastructureZeus Development Corporation released improve the standard of living without required to mine and transport raw coal,the study on October 18, in which it having to compete for high-priced oil.” gasify it, and then to dispose ofhighlights the cost advantages of UCG The report reiterated the view mountains of ash.and the growing use of the technology in expressed in a Lawrence Livermore With UCG, the ash remainsAustralia, Asia, Europe, Africa and National Lab report in 2008 that UCG underground. Greenhouse gases (GHGs)North America, where natural gas prices developers could target low-grade coal can be captured and pumpedare below US$4 per million British buried deep in seams too thin to be underground or sold for enhanced oilthermal unit. mined economically. It concluded that recovery (EOR). The synthesis is The Zeus report highlighted that 10 UCG technology could thus increase harnessed as a cheap way to makenew UCG projects had been announced recoverable reserves threefold. electricity, diesel, petrol, lubricants, orthis year, which means 51 schemes that Indeed, according to the US-based other high-value products that are oftenuse the technology are currently in National Coal Council, UCG opens the imported at high prices.various stages of development around the possibility of a 300-400% increase in The UCG concept has been consideredworld. Eight of these are operational and recoverable coal reserves because it for decades. Conceived in the UK in theanother 43 are in the planning phase, the offers a means to tap the 90% of reserves 1890s, UCG was first developed in thereport noted. that are too deep, thin or low-grade to former Soviet Union in the 1920s, until it “UCG could solve a lot of the mine, representing perhaps one of the last lost out to cheaper Siberian natural gas.developing world’s energy supply untapped reserves of cheap energy. During the oil embargo years of thechallenges, provided [that] developers 1970s and 1980s, several UCG tests werecan manage environmental risks,” said a conducted by the US and in Europe. Copyright © 2012 NewsBase Ltd. www.newsbase.com Edited by Ryan Stevenson All rights reserved. No part of this publication may be reproduced, redistributed, or otherwise copied without the written permission of the authors. This includes internal distribution. All reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its contents
  • 18. UOGM 2011 Annual Review page 18 OCTOBER In the 1990s, China began UCG UCG schemes around the globe. All ofresearch and development, and it is these intend to target deep reserves thatcontinuing this effort, with some 30 UCG were previously considered as non-projects in different phases of commercial, and to managepreparation. India and South Africa have environmental risks, in part by capturingalso heavily invested in the technology, and sequestering greenhouse gases.owing to their vast coal resources. Environmental concerns Yet environmental issues remain the key obstacle to UCG’s evolution. In this respect, four fundamental environmental challenges were categorised by the report. First, there is public concern about groundwater contamination or air pollution if UCG fires burn in an uncontrolled manner owing to oxygen encroachment into the underground gasification chamber. Secondly, the potential liberation of toxic chemicals such as benzene, from coal into ash that may leach into groundwater supplies is a concern. Thirdly, surface subsidence caused by the void left when coal seams are converted to ash and syngas has been flagged as a potential problem. Finally, increases in GHG emissions caused by converting coal into syngas and the burning or chemically converting the syngas into fuels and chemicals has also been identified as a negative factor. Public concern about groundwater contamination and seismology has been But it is only recently that gas production costs. heightened by widespread fracking fortechnological advancements in In November 2009 Australian shale gas in North America. Moreover, atseismology, drilling and electronics have company Cougar Energy began least one UCG pilot project conducted inconverged to make the UCG process developing a pilot project to generate Wyoming during the 1970s resulted ineconomical. Recent cost estimates for power from coal that was still trapped environmental harm being caused owingUCG projects have come in at levels less underground, a pivotal moment that has to poor design, the report observes.than half of those of conventional coal- been viewed as a key factor in reigniting The report commented: “In a timegasification methods and well below interest in the 100-year-old when public outrage is frequent andshale gas production costs. “[UCG unconventional energy technology. familiar, UCG developers will faceoffers] an amazingly low-cost avenue to Several independent energy companies significant if not insurmountablemonetise one of the last remaining vast such as the Australia-based Linc Energy, challenges, where outcry can result inenergy resources – coal – cleanly and Wildhorse Energy and Cougar are now regulatory injunction. To mitigate thesecheaply,” the Zeus report said. using technological advancements to risks and win government approvals, It added that UCG costs per million push their UCG capabilities forward. developers will have to demonstrate thatBtu have been estimated by three Currently, eight projects in Australia, they are able to select coal reserves thatautonomous studies to range from China, Poland, Canada and Uzbekistan will not incur groundwaterUS$2.00–US$3.06, which is below shale are under way, the report stressed, with contamination.gas market prices and well below shale sites being surveyed to build another 43 Copyright © 2012 NewsBase Ltd. www.newsbase.com Edited by Ryan Stevenson All rights reserved. No part of this publication may be reproduced, redistributed, or otherwise copied without the written permission of the authors. This includes internal distribution. All reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its contents
  • 19. UOGM 2011 Annual Review page 19 OCTOBER Their designs must limit subsidence, surface subsidence. While some dependency on foreign oil.and their operations will have to monitor proposed UCG projects are being “These countries are most likely totightly and control hazards and proposed at depths greater than 1,000 recognise UCG solves more problemspermanently capture and sequester GHG metres, most nevertheless fall between than it presents. Therefore, we forecastemissions. Many UCG developers are 200-1,000 metres, the report pointed out. that UCG development will accelerate asconfident these challenges can be met It predicted that if UCG developers long as energy supplies remainwhile providing developing economies could guarantee effective means to constrained and prices stay high,” saidlow-cost fuels and chemicals.” manage environmental risks, “they will Zeus. go a long way in offering an With the shale gale having blownMoving forward environmentally viable, low-cost solution through the global energy sector it nowAn agreed strategy among developers is to developing countries that wish to looks like other technologies such asnow to target coal seams at least 150 improve their standards of living.” UCG could follow in its wake. Butmetres below the surface. Furthermore, Furthermore, for developing environmental problems will alwaysin the UK, sites for all conditional economies such as India, Pakistan, have the potential to put the brakes onlicences are offshore, eliminating risks of Bangladesh, China, Poland – and even progress.fresh groundwater contamination, developed nations like the UK and theuncontrolled fires, or ill effects from US – UCG offers an escape from their NOVEMBERMoving GTL into the oil businessCompactGTL has developed a small-scale GTL process to consume gas that mightotherwise be flaredBy Ed Reed CompactGTL’s technology is targeted at associated gas, and produces syncrude The process would be applicable to offshore extended well tests The economic rationale for CompactGTL’s technology is bolstered where flaring caps are in placeGas-to-liquids (GTL) plants have tended 700,000 barrels per day of additional feasibility studies for projects.”to be large-scale high-priced investments liquid hydrocarbon fuel,” the agency GTL has typically been considered toand have struggled to make much said. be a means of turning natural gas intoheadway, given the demanding project One company competing to fill this high-priced liquid fuels. However,economics. However, a new breed of gap is UK-based CompactGTL. “There’s CompactGTL’s process is slightlysmall-scale plants are coming to an incredible amount of interest in this different – instead of producing fuel itprominence and represent a new method space, with all sorts of businesses turns out synthetic crude, which can beof tackling the problems of handling springing up claiming to have made blended with the natural crude at theassociated gas. some kind of progress on small-scale point of production. The International Energy Agency GTL. We treat that with a lot of Baxter said the decision to produce(IEA) issued a report on the “Golden Age scepticism because it is really not that syncrude helped make the economics ofof Gas,” earlier this year, highlighting the straightforward. We’re the only company installing its technology in a givenpotential of GTL to tackle flaring. that’s actually achieved it,” location easier. “Advances in technology suitable for CompactGTL’s business development “We’re not really in the business ofsmall-scale application [could] be director, Iain Baxter, told UOGM. GTL,” he said. “That’s the difference”important, particularly in the use of gas “We are the only business that’s truly between CompactGTL and the traditionalthat is currently flared. If one half of the positioned to contemplate providing a GTL players. “We’re really in the oilestimated 134 [billion cubic metres] of solution to oil companies – and that’s business – our process enables further oilgas flared in 2010 were used as GTL reflected in how oil companies are production.”feedstock this could produce around coming to us and starting to fund Copyright © 2012 NewsBase Ltd. www.newsbase.com Edited by Ryan Stevenson All rights reserved. No part of this publication may be reproduced, redistributed, or otherwise copied without the written permission of the authors. This includes internal distribution. All reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its contents
  • 20. UOGM 2011 Annual Review page 20 NOVEMBER Costs for a plant capable of producing 1,000 bpd of syncrude were estimated by Baxter to be in the US$150-200 million range, although utility considerations and tailgas handling would play a large role in determining them. “It’s how you integrate that plant with the rest of the production facilities: what else is there that can make use of the tailgas, can power be generated from that or do you have to have zero tailgas? If that’s the case then you have to recycle it and that makes the plant capable of producing more syncrude – but it also has a [capital expenditure] impact,” he said. Liberated crude An area of particular interest for the GTL process is one described by The company, Baxter said, bases its “In terms of lead time for a typical CompactGTL as “liberated crude.”technology on “oilfield economics” and FPSO, from the final investment decision Baxter explained that this was of interestas such “we have much lower [FID] it would take under 36 months – where a company was forced to deal withsensitivities to some of the usual GTL and certainly our GTL project plan a legislative cap on gas use, for instanceeconomic factors.” would fall within that delivery timeline,” where flaring is prohibited. In terms of scale, CompactGTL’s Baxter said. The company’s plan Typically, he said, there will come aprocess works best up to around 1.4-1.7 involves its strategic supply chain point where in order to meet suchmillion cubic metres per day. “It’s a case partners to ensure “the GTL plant isn’t standards oil production will have to beof adding more modules,” Baxter said. the thing that holds up the FPSO shut in. “That’s not what the oil company“If you start to make the plant too big project.” wants and it’s not what the country’sthere will come a point where it doesn’t Japan’s Sumitomo Corp. and government wants either, as it will losemake practical sense – if you’ve got that Sumitomo Precision Products have tax revenue or profit oil,” Baxter said.much gas you start to reach the point signed up as manufacturing partners for By not flaring the gas, a company canwhere you wouldn’t need a modular CompactGTL – also investing in the avoid shutting in production. It canapproach.” company – and an unnamed catalyst benefit from the additional stream of provider has also joined up. syncrude but conforming to the gas useFloating GTL In addition to syncrude, the limit can allow far more crude to beOne area in which CompactGTL hopes CompactGTL process produces an produced.to have success is offshore Brazil, where amount of tailgas and wastewater. These Based on an associated gas-to-oil ratioextended well tests are required for the can be recycled back into the plant or (GOR) of 1,000 cubic feet (28 cubicsubsalt. Baxter declined to give any treated, depending on the local legislative metres) per barrel of crude, Baxter saiddetails on the company’s plans with and client operational requirements. The treating 10 million cubic feet (283,000Petrobras. GTL plant produces around one barrel of cubic metres) without flaring could free The GTL company has been running water – containing 2% alcohol and some up to 10,000 bpd of extra crudean onshore 20 barrel per day test plant in trace oil – per barrel of syncrude. production – plus the 1,000 bpd ofBrazil for around nine months and has The water can be treated to the extent syncrude.entered into a co-operation agreement where it can be used to generate process Working out how much such a plantwith SBM on integrating the full GTL steam or to the point that permits local would provide in terms of additionalprocess into floating producing, storage discharge, with the second option usually revenue would depend on a number ofand offloading (FPSO) units. cheaper. factors, such as the fiscal regime, but a In order to achieve the optimal Water to feed the reforming reactors US$40 per barrel netback would generatecombination, he said, the GTL plant has can be brought onboard via a an additional US$150 million per year ofto be designed as part of the FPSO from desalination plant, which can use the additional revenue, Baxter said.the beginning, rather than retrofitting the low-grade heat generated from thetechnology into such a unit. Fischer-Tropsch process. Copyright © 2012 NewsBase Ltd. www.newsbase.com Edited by Ryan Stevenson All rights reserved. No part of this publication may be reproduced, redistributed, or otherwise copied without the written permission of the authors. This includes internal distribution. All reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its contents
  • 21. UOGM 2011 Annual Review page 21 NOVEMBER “There are a range of projects and to reduce this wasteful practice. Efforts providing “multiple clients in multiplesome don’t reach that level, but it can be have been made to stop flaring but with continents with different scales of plants,very attractive. We feel that to drive little success, as the majors working in both on- and offshore, dealing withsmall-scale GTL at current costs this has the country find it easier to pay the fines. associated gas problems and enablingto be on the back of freeing up oil In addition, Abuja previously them to carry on with their oilfieldproduction,” he said. demonstrated that it was unwilling to activity.” The prospect of halting flaring and suffer a reduction in oil flows that would The first commercial order fromliberating additional crude is one that has come about as a result of stopping CompactGTL will come “fairly soon,”received support from a number of flaring. Baxter predicted.sources in the industry. While The NAPIMS official said the smaller One area in which the company’s roleCompactGTL appears to have made its companies operating in Nigeria would be will continue will be in servicing themost progress in Brazil, an official from the most likely to pick up the technology GTL modules. Catalysts in the reactorsNigeria’s National Petroleum Investment and predicted project finance would play do become less efficient as time goes byManagement Services (NAPIMS) told a role in supporting its implementation. and Baxter said CompactGTL wouldUOGM that the process would also be provide a service of swapping outapplicable to the West African state. Future facing modules for refurbishing. Nigeria is one of the world’s top flarers CompactGTL hopes to be in a positionof gas and the government faces pressure where, in 10 years time, it will be DECEMBERArgentina ready to reap rewards ofits unconventional potentialThe growing interest in Argentina’s shale reserves is likely to revitalise the country’s oiland gas output and provide a boon to the governmentBy Charles Newbery Energy prices in the country – among the world’s lowest – could rise as the government seeks investors Repsol’s chief believes US$28 billion should be invested in the development of shale resources in Neuquen A strong legal framework and regulatory environment is necessary to attract significant investmentEnergy prices in Argentina are poised to next few weeks, he said. He cautioned Residential consumers, for example, payrise in what could prove to be a boon for that energy would be kept at prices about US$0.50 per million Britishupstream investors in the country. The thought beneficial for industry to thermal units for gas compared with thenews comes as interest in Argentina’s compete against imports and in export US$3 per million Btu spot price in theunconventional oil and natural gas markets. US.reserves begins to ramp up. “Not [every] price is good,” he said. “It The low prices helped spur industrial With upstream investment revitalised, has to be competitive.” output to power the economy, which hasArgentine Planning Minister Julio De This is in line with the economic grown by an average of 8% per yearVido, the government’s chief energy policies of Argentine President Cristina since 2003.architect, said last week that oil and gas Fernandez de Kirchner and her late But the low prices have proved hard toprices would likely be reviewed. husband and predecessor, Nestor sustain, with the government over the “We will work with the Oil Industry Kirchner. past month cutting subsidies for publicChamber to analyse putting a value on They pulled the economy out of the services – including gas – to safeguardthese resources,” he said. crisis that crippled the country in 2001- state finances against a prolonged The price increases will form part of a 02 with pro-growth measures, including slowdown in the global economy.2020 strategic plan for economic controls that made gas and power priceexpansion that will be announced in the among the lowest in the world. Copyright © 2012 NewsBase Ltd. www.newsbase.com Edited by Ryan Stevenson All rights reserved. No part of this publication may be reproduced, redistributed, or otherwise copied without the written permission of the authors. This includes internal distribution. All reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its contents
  • 22. UOGM 2011 Annual Review page 22 DECEMBER The downturn could reduce demand resources, far more than its 13.4 tcf and steel industries,” De Vido said.and prices for its exports, in particular (379.5 billion cubic metres) of proven This news is encouraging oilfrom China, the biggest buyer of its conventional gas reserves. companies.soybeans. YPF, which is backed by Spain’s “The energy industry has a lot to do Argentina relies heavily on taxes – Repsol, has already recently made major and it has huge advantages that need toincluding those on soybean exports – to headway in the unconventional sector, be [exploited],” said Andres Carosio,finance the state because it has not fully discovering 927 million barrels of shale director of public affairs at Medanito, asettled a US$100 billion debt default oil, with production from its shale assets Buenos Aires-based oil company.from 2001 to regain access to global ramping up to 5,000 bpd. Medanito has created partnerships withcapital markets. EOG Resources and Shell this year for The flipside is that without higher Price adjustments shale oil and gas development inprices the country cannot develop its Oil companies say that while the Argentina. The deals are for a total ofhuge shale gas and oil resources. domestic price of crude, which averages US$1.2 billion in spending over the next US$55 per barrel, is adequate for shale five years in four blocks in Neuquen, aBouncing back oil development, the natural gas price is southwestern basin.Energy companies reined in spending too low. Yet such spending is small beer,after the 2001-02 economic crash It needs to be around US$6-8 per according to some estimates.ushered in greater state intervention, million Btu to take into account the hefty Repsol’s CEO, Antonio Brufau, earlierincluding the price controls as well as costs in drilling, hydraulic fracturing this month said that US$28 billion shouldhigher taxes, export restrictions and (fracking) and technological advances. be invested in the development of shalesudden regulatory shifts. This led to a It appears the government wants to use oil resources in Neuquen.plunge in oil and gas production and the country’s shale potential as areserves, with crude output extending springboard to develop drilling Legal frameworkdeclines to hit 566,000 barrels per day technology in Argentina and create new With big investment numbers beingthis year, a third less than a record jobs. mooted by top-level executives, there is847,000 bpd recorded in 1998. Gas “We will have a gigantic development clearly a growing buzz about Argentina’sproduction is down 13% to 125 million in technology and in the metalworking unconventional potential. The country’scubic metres per day from a demand for gas – whichrecord 143.1 mcm per day in currently stands at 120 million2004. cubic metres per day – is The dwindling output has growing, as are opportunities toled to energy shortages and a export new production. Thecutback in exports in order to country also has one the mostfeed the domestic market. mature gas market in SouthYet with the economic boom, America.the government has had to However, for investors tostep up imports to meet commit to developingdemand – paying up to Argentina’s vast shaleUS$16 per million Btu for resources, they require a strongliquefied natural gas (LNG). legal framework and regulatory This has sparked calls for environment in which toraising domestic prices to operate.stem the decline in “Investments in shaleproduction, calls that have development so far have beenstrengthened over the past moderate,” said Luis Giussani,year with estimates of the an independent energycountry’s huge shale consultant in Buenos Aires.potential. “Clear rules and legal security The US Energy are needed for the investmentInformation Administration to turn around the slide in(EIA) said in April that the reserves. There is a market forcountry had 774 trillion cubic the production but Argentina isfeet (21.9 trillion cubic not the securest place tometres) of shale gas invest.” Copyright © 2012 NewsBase Ltd. www.newsbase.com Edited by Ryan Stevenson All rights reserved. No part of this publication may be reproduced, redistributed, or otherwise copied without the written permission of the authors. This includes internal distribution. All reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its contents
  • 23. UOGM 2011 Annual Review Back Page NEWSBASE INFORMATION HEADLINES FROM A SELECTION OF NEWSBASE MONITORS THIS WEEK CUSTOMERS INCLUDEOil and Gas SectorAfrOilThe Kenyan government is mapping out seven new blocksin the Indian Ocean.AsianOilSenior Thai government officials have visited Myanmar tonegotiate new gas concessions on behalf of PTTEP.ChinaOilCNOOC is set to begin drilling its first well in Block F QuickTime™ and aoffshore Cambodia’s southern coast. decompressor are needed to see this picture.EurOilStatoil will spend a total of US$5.84 billion on developingthe Luva field in the Norwegian Sea.FSU OGMPoland has urged Russia to invest in its own shale gasdeposits.GLNGGazprom is to export 10 million tonnes per year of LNG toIndia from 2016.MEOGGulfsands Petroleum is continuing its Syrian explorationwork despite a halt in production.Downstream MENATotal is in talks with QP to “significantly” expand the146,000 bpd Ras Laffan condensate refinery. For further details on the stories above and NewsBase’s entire product range: tel: +44 (0) 131 478 7000 e-mail: news@newsbase.com Copyright © 2012 NewsBase Ltd. www.newsbase.com