The technological advances responsible for locating and drilling unconventional shale-gas plays in the U.S. are successfully being transferred overseas to sites such as Poland, China, India and South Africa. This according to speakers at the annual Colorado Oil and Gas Association event in Denver.

Two serious issues raise concerns, however: Is there an in-country market and transport system such as pipelines or processing facilities, and can gas from unconventional resources be produced and compete with gas from traditional exploration or current sources?

According to Donald Hertzmark, international energy specialist, DMP Resources, Europe could become controlled by “Gazprom-iztan.” Russia’s Gazprom is increasing pipeline capacity by 50% to 60% to Europe, raising the possibility that it could manipulate European markets unwilling to comply with its politics.

Hertzmark noted that Russia could increase prices, limit supply or undercut shale gas with low prices to limit competition, all of which would make gas a “compliance tool.” He also pointed out that gas, if not tied to oil prices, can be economically attractive for electric utility power generation. In the U.K., gas-powered electricity rates are 50% cheaper than in Spain.

While an outstanding market for unconventional gas exists in Western Europe, with its high population density and industrial users, the region is made up of nine nations with differing regulations, limited rig availability and land-use issues, including a lack of open development land.

Robert Clarke, unconventional gas service manager, Wood Mackenzie Inc., cautioned that unconventional development may not happen as quickly in the rest of the world as it has in the U.S.

“While long-term fundamentals support the development of these unconventional resources, there are a number of key drivers and factors present in the U.S., ranging from the geology of the key shale plays to the regulatory framework, which aren’t all present to the same extent in these other countries,” he said.

One exception is Poland. Major companies with shale gas expertise—ExxonMobil, Conoco­Phillips and Marathon—are acquiring stakes there. Marathon’s Poland licenses currently total about 545,000 acres, including an onshore exploration license of 249,000 acres in southern Poland’s Orzechow block and almost 300,000 acres in the Kwidzyn block in the north-central region. Marathon operates both and holds 100% working interests.

The Silurian shale that runs through Poland is laterally extensive and may be up to 200 meters thick. In some areas it is within the gas window. Initial evaluation shows that the Silurian has a high organic content and silica content suitable for fracturing. Early estimates indicate a potential recoverable resource of 48 trillion cubic feet over a decades-long period.

Nonetheless, Clarke noted that a number of the most encouraging areas lie within national land that is off-limits to exploration. “Looking at Poland’s Silurian shale economics, average well depths are deeper than many of the most technically challenging U.S. plays, and we estimate well costs could be over $14 million,” he said. That results in a gas breakeven price significantly higher than numerous U.S. unconventional gas plays.

Regarding other countries, China has first-production coalbed-methane targets of 2015 and 2020, but there are infrastructure and equipment hurdles to be overcome. The Shanxi Province alone has an estimated 7- to 10 trillion cubic feet of recoverable coalbed methane resources. India is planning its first-ever offer of shale-gas areas for exploration in 2012, even as it targets the launch of the ninth and possibility last auction of oil and gas blocks later this year.

And, in South Africa, several companies, including Chesapeake Energy and joint-venture partner Statoil, Falcon Oil & Gas and Shell are ready to explore for unconventional and conventional gas and oil in the Karoo Basin.

Despite growing interest worldwide, the success seen in the U.S. in developing unconventional resources will not happen as quickly or as readily elsewhere, said Clarke.

Comments