Shale gas producers facing tighter regulation

Shale gas has seen enormous amounts of interest and money from major oil companies invested in it over the last few years largely because of technological advances making it possible to exploit reserves. They are seen as long-lived reserves that can help prop up the majors’ net oil reserves and simultaneously reduce American dependency on foreign imports, while reducing carbon emissions.

This has led to majors like ExonnMobil Corp. spending US$ 41 billion to acquire XTO Energy, the shale gas driller; their combined resources now make ExxonMobil Corp. the biggest US gas producer with reserves of some 45 trillion ft². BP has also paid US$ 1.75 billion to acquire Chesapeake’s shale interests.

All of this comes at a time when natural gas prices are historically low and consumption is way down; however the major oil companies are keen to get involved now and take advantage of low asset prices for shale gas interests. Most shale gas developments are still profitable as well, even with the global downturn. It is estimated that global energy consumption is expected to rise by some 40% over the next two decades, seen in this light, shale gas could be a crucial bridge fuel for the industry.

However there are obstacles to shale gas development, there is still debate about the longevity of shale wells, as it has been observed that shale wells have a steep production decline soon after drilling commences. Contractors have argued that this levels off relatively quickly, in what they call a hyperbolic decline curve and the wells will still generate production for decades. Sceptics have argued that the well’s gas production could just go into terminal decline after the commencement of production, meaning the reserves are overvalued. However, most shale wells are too new for any conclusive argument to be put forward yet.

There is also looming federal legislation over shale well contractors use of ‘fracking’ to unlock shale gas reserves. This is the practice of injecting a mixture of sand, chemicals and water under pressure a mile underground to break up the shale formations. There have been concerns that this could pollute groundwater, and a project was recently halted in New York, USA on these grounds. However, no link can be directly proven, as companies are not obliged by law to disclose the chemical composition of the mixture they pump underground. But this could all change if the ‘Fracturing Responsibility and Awareness of Chemicals Act of 2009’ is successfully passed in Congress. This act would require companies to fully disclose the chemical composition of the mixtures they use in production and bring them under closer scrutiny.

Major oil companies have so far been unconcerned by uneven demand for natural gas and low prices, but this increased regulation could spell disaster.

Read the article online at: https://www.oilfieldtechnology.com/drilling-and-production/18022010/shale_gas_producers_facing_tighter_regulation/