Could shale gas shake up the European gas market?
By Alex Froley
November 24, 2009 - In June 2009 the US Potential Gas Committee reported a 39% increase in potential US gas resources from its 2006 to its 2008 survey, a massive increase helping to overturn fears of dwindling reserves and increased import dependency. (See chart: US gas resource base jumps 39% between 2006 & 2008).
The new resource base figure of 1,836 trillion cubic feet (52 trillion cubic meters) was the highest resource evaluation in the committee's 44 year history.
And most of the increase came from the re-evaluation of shale gas plays, the committee said. Shale gas now made up 616 Tcf (one third) of the total resource base.
"New and advanced exploration, well drilling and completion technologies are allowing us increasingly better access to domestic gas resources--especially 'unconventional' gas--which, not all that long ago, were considered impractical or uneconomical to pursue," said John Curtis, Professor of Geology and Geological Engineering at the Colorado School of Mines, and director of the Potential Gas Agency.
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"Our present assessment demonstrates an exceptionally strong and optimistic gas supply picture for the nation," Professor Curtis said. So could reappraisal of Europe's shales result in a similar massive boost to resource estimates?
A 39% boost to domestic resources would be welcomed by a continent still questioning the reliability of gas in the wake of the major Russia/Ukraine gas transport dispute at the start of the year.
At the 14th International Gas and Electricity Summit in Paris in October senior European gas industry figures were generally cautious.
That surprised Charif Souki, chairman and CEO of US-based liquefied natural gas terminal developer Cheniere Energy. "Those are the same speeches I heard in the US," Souki said. "Non-conventional reserves do exist and will be produced, it's just a question of price." (See chart: Gas price divergence, January 2006 - December 2009 (Eur/MWh)).
Cheniere built the Sabine Pass LNG terminal in the US, on the border of Texas and Louisiana, expecting the US to import growing volumes of liquefied gas. But Souki said in the future the US might now become an exporter of LNG, such was the effect of shale gas.
ExxonMobil investing in European shale gas
Big companies are now investing money in investigating European shale gas, for example ExxonMobil in Germany.
A company spokeswoman told Platts in November that ExxonMobil's affiliates MEEG and BEB have acquired three licenses for exploration in Lower Saxony, Germany this year, covering nearly two million acres, where it hopes to examine shale gas potential.
"Over the next five years, ExxonMobil plans to review existing data and potentially drill and analyze coring wells in the permitted areas," the spokeswoman said.
Tim Cejka, President ExxonMobil Exploration Company, spoke on the subject in a presentation to Houston's Baker Institute in October, available on the internet.
"While unconventional gas has been around for a very long time, technologies just didn't exist until recently to commercially develop this resource," he said.
The challenge of shale gas is that the gas--which is the same as any other gas--is trapped in rocks that have much smaller pore spaces, and much lower permeability, than conventional gas reservoirs.
The pore spaces can be 100 times smaller than the diameter of a human hair, Cejka said. Such unconventional reserves will not flow at a commercial rate without stimulation.
That is normally done by "fracking"--forcing fracture water down into the rock to break down spaces and release the gas. Advances in the technology for doing this in recent years have been behind the massive US resource increase.
Cejka said it was "probably too big" to say shale gas would "revolutionize the global gas market."
But Cejka said increased development of shale resources could "pull people away" from other "more expensive projects" and push those further out into the future.
Onshore shale gas could be much easier to develop than a major new deepwater offshore project. But shale gas has its own challenges.
While a gas well in a Qatari reservoir might produce 150 million cubic feet/day, a shale gas well might produce only 4 or 5 million cu ft/day.
"It just takes a lot more wells," Cejka said. Those low volumes mean that shale gas needs to be "close to the market," he added.
ExxonMobil's strategy, he said, was to "follow the lights," meaning to look for shale gas reserves in well populated areas with established demand. Germany's Lower Saxony region is one such location.
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