Last month, Shell signed a deal with the Ukraine to begin seismic testing and drill 15 test wells in the eastern part of the country. The company is hoping to find economically viable shale reserves, and the country’s government has intimated the investment could be worth up to US$ 10 billion.
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In this issue of Oilfield Technology, our Pioneer Resources article (pg 35) offers some historical context on what it describes as three distinct shale gas ‘revolutions’ in the USA. The article makes the distinction between the initial ‘quiet rise of the Barnett shale’ and the subsequent ‘shale gas revolution’ connected with the discovery of the Haynesville well. The article suggests that industry players looking for future thrill rides should be looking overseas, as ‘the days of discovering the six county, 100 million bbl./square mile behemoth are likely numbered in the continental United States’. Here in the UK, the Chancellor recently unveiled tax breaks for shale gas exploration and ended a moratorium on hydraulic fracturing, which was imposed after tremors were felt as a result of shale gas activity in 2011. But how is the rest of Europe currently positioned towards the possibility of hosting its own shale revolutions? It remains divided. Shale gas extraction is allowed and permits are currently issued in, for example, the UK, Portugal, Germany, Poland, Greece and Turkey. Countries currently imposing a ban on activities include Bulgaria, the Czech Republic, the Netherlands and France. The French President, François Hollande, has gone so far as to say that the nationwide ban on hydraulic fracturing would unquestionably remain in place for the duration of his five year term. Austria has allowed extraction in theory, but has imposed such costly environmental compliance conditions that any company looking to develop shale reserves in the country would likely find the enterprise overall uneconomical.
Interestingly, the shale boom in the USA has done more than just inspire Europe to follow suit. A recent news story in the Financial Times highlighted how the ‘revolution’ has led to an increased uptake of coal as a feedstock for European power plants, as a result of lower demand for domestic reserves of the fossil fuel at home in the US. However, Milton Catelin, head of the World Coal Association, has been quoted as saying, “We don’t see this as a renaissance of coal, it’s just economics”. Conversely, gas most certainly is universally acknowledged as experiencing a renaissance. The main slogan to accompany last year’s World Gas Conference was, tellingly, ‘The Golden Age For Gas’.
Europe has a long way to go to match the USA in terms of shale extraction. Even Poland, the most ‘pro-shale’ European country, only has around six drill rigs operating – compared to around 1200 rigs currently drilling in and around the USA’s main shale plays. But shale gas production on an American scale does have its issues. Currently, the USA is fifth in the world in terms of the volume of gas it flares; just behind Russia, Nigeria, Iran and Iraq, and environmental concerns about the trend are growing. This month, the Financial Times ran a startling image on its front page. It was a nighttime satellite photo of the continental USA, and showed an area of bright lights the size of a major city somewhat incongruously situated in the heart of North Dakota. Amazingly, the light was being emitted from flaring in the Bakken. This image could almost be a vision of the promise and challenges held in our mid to long term energy future...
The future is bright; the future is fraccing.