Shale Gas – A Case of What We Know and What We Don’t Know

With headlines ranging from claims that shale is the world’s source of cheap gas, to those that say that fracking is the ultimate evil, you would had to be living on another planet to not have seen or read something about shale gas in the last few years.  This blog by Leigh Bolton*, principal of Holmwood Consulting, challenges us to take a balanced view of shale gas:

The barrage of “print” on shale gas has been coupled with any number of industry conferences claiming to give the only answer to shale gas developments.  All this has, however, probably confused rather than helped.

In an effort to bring clarity, here are my top ten “knows” and “don’t knows” on shale gas.

So, what do we actually know?

Firstly, we know that shale has been known by geologists for a very, very long time but no-one did very much because there was an abundance of cheap conventional gas wells for companies to develop – why do something technologically difficult and expensive when there are easy fields to develop?

Secondly, there is a huge amount of shale rock around the world and it exists in almost every country, with China having probably 50% more than the USA, for example.  However, we need to be careful here as we need to distinguish between large shale gas resources (what we think is present) and much smaller reserves (what we think we can technically and commercially recover).

Thirdly, shale developments are a resource play as the natural gas is located everywhere throughout the shale rock formation and not accumulated in trapped reservoirs like “conventional” plays.  These shale rocks are the source rock for the conventional reservoirs.  They lie at sufficiently deep levels (more than 1000m) that their organic matter has been converted into gas (rather than oil).  However, we come back to those geological favourites of porosity and permeability.  A large proportion of the shale gas remains trapped in the shale, since it is virtually impermeable.  The gas is therefore well dispersed and held within this very dense shale rock in pores of only about 1 micron/ 1/1000 mm size.

Fourthly, because of this micro-pore and no permeability situation, we are forced to use horizontal drilling (to reach the maximum bed area) and hydraulic fracking (to fracture the shale rock locally and allow gas to migrate into the well) techniques. “Fracking” has caused enormous news with misleading videos posted on the web, some (now discredited) reports on environmental effects, plus the usual “rent a mob” protests.  It is perhaps interesting to note that the oil industry has used fracking for many, many years without comment – it was only when it was further developed for shale gas development in the USA that it became headline news.

Fifthly, there is no doubt that the path-finding shale developments in the USA completely changed the USA’s natural gas market, moving the country to self-sufficiency and driving natural gas prices to new lows.  There have been some unexpected results however in that the gas sales price has been driven so low that a number of shale gas developers have plugged their gas wells and are now producing shale oil from elsewhere in the formation or are looking to export their shale gas production as LNG to world markets in order to make sufficient returns.  Additionally, there are now moves in the heartland of the Barnett shale (the first US shale field to be developed) to ban fracking inside city limits – people have made their money and are now reverting to the old NIMBY actions.

Sixthly, developments in the USA are no panacea for anyone else.  The USA has had a history of wildcat drilling over many years, with many service drilling companies and rigs, and thereby already knew much of the geology of the country. There was also abundant water for the fracking process.

So, what do we not know? 

Seventhly, most countries in the world outside the USA have little knowledge of the shale geology and will need to spend probably 5 years or more just drilling to see what’s there.  Outside the US there has been little culture of wildcat drilling.  This is the case in Europe’s flagship shale gas country, Poland, where sensible production levels will not be achieved for several years yet.  In China, for example, they are in the very early stages of shale development and water limitations in many areas will limit or negate any production.

Eighthly, there are still concerns about subsurface movements (mini-earthquakes) and potential environmental issues.  As an industry shale gas production is in its infancy and we do not have enough data to argue coherently that all is well and we are, quite frankly, doing a pretty poor job of explaining shale gas to communities.  There will always be “antis” but I am talking about the man in the street here.

Ninthly, there are more and more articles and comments appearing that the US “shale gale” might not last as rapid well production decline and other economic factors come to light. Industry observers are now using words like “a stop gap in the market to bridge to something else” – worrying for others if the reference country and benchmark might be wobbling.

Tenthly, and lastly, there is always the great unknown – we don’t know what we don’t know.  This is just as true for shale gas as it is for the whole of the oil and gas industry.

So, this is a very personal view of the shale gas world.  I have been accused of pessimism by some advocates and pragmatism by others in the market.  I have tried not to let emotion cloud this short blog and will close by asking:  “Do we need shale gas?”  The answer is, “Definitely yes, but as a piece of the gas supply puzzle and not as the single answer to the world’s gas or energy needs.”

And, as additional food for thought, shale gas is described as a “game changer” but the potential of extracting gas from methane hydrates would be a much bigger “disruptive technology” to the energy industry.

*Leigh Bolton is the principal of Holmwood Consulting Limited. a leading independent gas, LNG and power consultancy.  He can be contacted at leigh.bolton@holmwood-consulting.com and the company website is http://www.holmwood-consulting.com/

Comments

  1. Jim Groombridge says:

    This is a well balanced essay that mirrors my opinions. The synthesis is – ‘We need shale gas as a piece of the gas supply puzzle but it cannot be the single answer to the world’s energy needs’.

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