Of late, there has been a change in the mood of global shale oil and gas enthusiasts. While the enthusiasm has not dimmed, exaggerated claims about potential reserves are fading and there is a new found sense of pragmatism from Poland to China.
Country after country, thought to be holding shale gas reserves, is coming to the realization that even a partial replication of the US shale bonanza in their own backyard will require time and patience above anything else. However, the realization has come about the hard way for some.
Established techniques that made US shale exploration one of the biggest oil and gas story in recent years were found wanting elsewhere. For instance, a differing geology ensured what had worked for American shale rock formations did not quite cut it in Poland. Just ask Eni , ExxonMobil, Marathon Oil MRO -2.62% and Talisman Energy , all of whom have exited the Polish shale market.
That leaves Chevron CVX -1.02% as the only international oil and gas major persisting with Poland. Ukraine, another ‘hot’ shale destination is troubled by internal strife where Shell, Eni and Chevron are toughing it out. German legislative framework is stalled, France has a shale gas exploration moratorium while the Brits are grappling with environmental protests.
Tapping Argentine shale is complicated by the country’s macroeconomic environment, while China has downgraded its 2020 forecasts for domestic shale gas production to 30 billion cubic meters (bcm) per year from a previous target of 60 to 100 bcm. Charles Dewhurst, International Liaison Partner at BDO, feels a reality check is doing the industry a whole lot of good.
Schematic cross-section of the subsurface illustrating types of natural gas deposits (Photo credit: Wikipedia)
“It took the US better parts of three decades to get a meaningful return on investment. As we enter the next phase of shale development, bulk of this would be outside North America. The wider industry is learning from the US experience, as is evident in commercial activity and policymaking efforts,” says the Houston-based industry veteran.
“There are several countries that could do a lot more but have chosen not to, for instance Germany and France. Yet Poland, Russia, Ukraine and the UK look to be playing the long-term game. Initial excitement has given way to the realization that geology is as different as the operational climate. Not all jurisdictions will monetize shale gas assets as quickly as the industry hopes for.”
Dewhurst also feels transportation and logistics need to be addressed in tandem with attempts to bring potential shale gas projects onstream.
“Historically, the industry has always been gung-ho on the exploration and production side while not paying adequate attention to infrastructure. European gas pipeline infrastructure is nothing on the scale of the US. Australia has similar infrastructural challenges. Even in the US, pipeline capacity is a big issue with a developmental lag of 10 to 15 years being par for the course.”