What Starts from Shale Gas may Change the Global Energy Landscape

“We are the Saudi Arabia of natural gas.” President Barack Obama said in his State of the Union 2012.

On March 1^st, the Chinese resources ministry sadi that preliminary surveys showed the country had explorable shale-gas reserves of 25.1 trillion cubic metres, in theory enough to meet China’s gas needs for the next two centuries. (1)  

Begin in 2014, Warsaw wants to tap an estimated 5.3 trillion cubic meters of recoverable reserves of gas – enough, according to the U.S. Energy Information Administration, to supply Poland with more than 300 years of its domestic energy needs. 1. Insight: Poland’s shale gas play takes on Russian power. (2)

Ukraine’s State Geological Service estimates the reserves of the Yuzovska area at 2 trillion cubic metres and those of Olesska at 0.8 to 1.5 trillion cubic metres. The government will accept bids until April 23, and winners will be able to enter production-sharing agreements with state mining and energy company Nadra Ukrainy. (3)

All the countries above are happy to get the gift from the deep earth. Meanwhile, the appearance of shale gas is changing the energy world step by step. Let’s look at the BP review of the World Energy 2011 first.

 

 

Natural Gas Trade Movements 2010 BP Statistical Review of World Energy 2011(4)

Oil Trade Movements 2010 BP Statistical Review of World Energy 2011(4)

From the diagrams of the oil and gas trade movements, we can learn where the United States, China, Japan, and Europe get their energy from. China and Japan get energy from Mid-East mostly. Europe depends on Russia. And the United States get the oil and gas from the whole world.

But what will happen when the shale gas become the dominant energy? Let’s look at the next diagram from EIA.

            Map of 48 major shale gas basins in 32 countries(5)

Technically Recoverable Shale Gas Resources by Country
Country	Reserves
Algeria	231
Argentina	774
Australia	396
Bolivia	48
Brazil	226
Canada	388
Chile	64
China	1,275
Colombia	19
Denmark	23
France	180
Germany	8
India	63
Libya	290
Lithuania	4
Mexico	681
Morocco	11
Netherlands	17
Norway	83
Pakistan	51
Paraguay	62
Poland	187
South Africa	485
Sweden	41
Tunisia	18
Turkey	15
Ukraine	42
U.K.	20
United States	862
Uruguay	21
Venezuela	11
Western Sahara	7
Total (rounded)	6,622

(Reserves are in trillions of cubic feet) (5)

Where are the major shale gas resources? The countries most in need of the energy in the world: the United States, China, and Europe.

What does it mean to the global energy landscape?

1. The major energy markets become major producer of shale gas. It saves much transmission fees of energy, which is good to the environment, but people like to ignore it;
2. It diminishes the Russia’s share in Europe and the Mideast’s share around the world, reducing the chances that Moscow can use energy as a political weapon and limiting the ability of Mideast to determine the oil and gas price;
3. It reduces the competition between China and the United States. As both of the countries have new energy supply to boost their economy, they won’t fight for energy on Middle East and the rest of the world.(6)

In the future, when we open the newest BP review of World Energy, we may find that the direction of oil and gas trade has already shifted.

References:

(1) China claims world’s biggest shale gas reserves http://www.telegraph.co.uk/finance/china-business/9117072/China-claims-worlds-biggest-shale-gas-reserves.html

(2) Insight: Poland’s shale gas play takes on Russian power http://www.reuters.com/article/2012/02/09/us-poland-shalegas-idUSTRE8180PM20120209

(3) Ukraine announces tenders for 2 shale gas deposits http://www.reuters.com/article/2012/02/24/ukraine-shalegas-idUSL5E8DO2YJ20120224

(4) BP Statistical Review of World Energy 2011

(5) World Shale Gas Resources: An Initial Assessment of 14 Regions Outside the United States by EIA

(6) Shale Gas and U.S. National Security
http://bakerinstitute.org/programs/energy-forum/publications/energy-studies/shale-gas-and-u.s.-national-security

Lets “frac” the world

On January 23, 2012, U.S. Energy Information Administration (EIA) made the early release of its Annual Energy Outlook for 2012. On it, EIA focus and develop the different factors that are nowadays or in the future shaping the U.S. energy markets in the long run. Of those, I will focus on two that from my point of view and interests seem to be highly promising. Number one is the increase of domestic crude oil production, and with it, a slow down over the petroleum imports. This is relevant if we consider that is a change of direction of the declining curve of U.S. oil production, which since 1986 was going down slowly but firmly. EIA project that the increase will came from the continued development of tight oil and offshore resources. However, they seem to not take into account two recent players in the oil equation: oil shale and shale oil. While these two players have been seated in the bench for a long time, it seems that they are now start to figure on the radar of not only the independent but also the major oil companies [1].

Number two, and the one that I will develop further, is the increase of natural gas production during the period of analysis (2010 – 2035). EIA estimates that natural gas production will rise from 21.5 Trillion cubic feet (Tcf) in 2010 to almost 28 Tcf in 2035, which is almost a 30% increase in the period. The unanimously responsible of such increment is the Shale gas, and the proliferation of the hydraulic fracturing technique to obtain it. Shale gas on its own will raise its participation in the U.S. natural gas production from 23% in 2010 to 49% in 2035. (Figure 1). This is really important if we consider the advantages of Natural Gas versus Coal in the fight over global warming and CO2 emissions [1].

 

While this seems pretty good, and almost as the future shines as a sunny day in Texas, it is important to mention that the reader most be cautious as EIA makes the assumption that current laws and regulations will remain in place and unchanged throughout the projected period (2012-2035). This is really important if we consider the situation that shale gas production is struggling nowadays, where hydraulic fracturing and water consumption is on the radar of almost every legislator.

Despite the fact that shale gas is promising for the U.S., it is not unique to its territory. Shale gas, has become such an important player in the energy markets, that almost every country with a developed oil and gas industry or even with a developing one is trying to find out if they have within its territory this precious new energy source. Seeing this movement, EIA has made an effort in helping those (countries, E&P companies, civilians, researchers) interested in shale gas around the world. On April 2011 they released its “World Shale Gas Resources: An Initial Assessment”, a study that assessed 48 shale gas basins in 32 countries, containing almost 70 shale gas formations [2]. The report was divided in two sections: first, the most prospective shale gas resources in a group of countries that shown some level of promise in the short term; and second, basins that have a sufficient amount of geologic data for resource analysis. While, this could be thought as brilliant, the company that conducted the report, Advanced Resources International, thinks that while it is a good beginning it is too superficial. On the report’s executive summary they actually include that “The information provided in the 14 regional reports (selected by the EIA) should be viewed as initial steps toward future, more comprehensive assessments of shale gas resources. The study investigators would have, if allowed, devoted the entire study budget to just one of the 14 regions and would have judged this more in-depth time and budget investment ‘well spent.’ Alas, that was not possible.” Such strong words from the firm that actually made the study could made the reader, go away from it, and wait until one with a deeper analysis came across. However, as Natural gas is the world’s fastest-growing fossil fuel, with consumption projected to increase at an average rate of 1.6% per year between 2008 and 2035—from 111 Tcf to 169 Tcf it is important to give it a look and see how the shale gas world outside the U.S. is shaping.

 

SOURCES:

[1] Annual Energy Outlook 2012 Early Release Overview

Available at: http://www.eia.gov/forecasts/aeo/er/executive_summary.cfm

[2] World Shale Gas Resources: An Initial Assessment of 14 Regions Outside the United States

Available at: http://www.eia.gov/analysis/studies/worldshalegas/pdf/fullreport.pdf

Environmental Concerns Cause Grief for Shale Gas Production

Although ultimately supportive, my friends in the oil and gas industry couldn’t help but to throw in a snide remark about how I was joining the enemy or “the other side” when I told them I was quitting my reservoir engineering job to pursue a master’s degree in environmental engineering. This is because the oil and gas industry feels threatened by the goals of the environmentally friendly. Yes, environmental teams are in place within the companies to comply with the various environmental regulations that come with the work of the industry, but it must be difficult for oil companies to get excited about protecting the environment when it too often gets in the way of meeting their end goal…making money.

I say all of this as a preface to the main topic of this post: environmental regulation of shale gas production. According to a recent Scientific American article I read, the EPA is tackling rising concerns that hydraulic fracturing otherwise known as “fracing” of shale gas reservoirs can lead to drinking water contamination causing negative environmental and health impacts. Currently the specific chemicals and their amounts used for fracing is unreported, as it is more of a trial and error process much like cooking without a recipe, where the fracing fluid is concocted with a pinch of “this” and a pinch of “that” to fit the unique needs of the job at hand. Although not knowing precisely what makes up the mixture means nothing to the reservoir, it means a lot to those concerned with the potential environmental impacts.

Most shale gas reservoirs are referred to as tight gas reservoirs, which means the permeability of the rock is too low for the hydrocarbons to flow freely, thus, fracing is needed. A mixture of water, sand, and various chemicals at very high pressure are injected into the rock formation to create fractures or channels in the rock to allow for easier transport of the gas into the wellbore. See a video on fracing here.

Shale gas production has been referred to as “a game changer” for the oil and gas industry, believed to yield a substantial natural gas supply for upwards of 100 years. However, with the EPA’s investigation, the industry will face some challenges, making this perfect picture a little less rosy. If the EPA’s study were to find proof that fracing techniques have indeed contaminated drinking water supplies at dangerous levels, new policy could be put in place that requires fracing service companies to reduce the amounts of certain chemicals they inject into the reservoir as well as report the specific amount of chemicals used,  causing what might be a drastic change in the way shale gas drilling is implemented. This of course could hurt the profits of the oil and gas industry, making Big Oil very upset.

So, being a former employee of the oil and gas industry with a great appreciation for this type of work, I understand the frustration of those involved, but as a proponent of clean energy technologies, I feel what the EPA is doing is necessary as well as a good thing.