(John Kemp is a Reuters market analyst. The views expressed are his own)
By John Kemp
LONDON, June 7 (Reuters) - Horizontal drilling and hydraulic fracturing are transformative technologies, but their eventual impact on global oil and gas supplies depends on whether the production techniques pioneered in just a handful of shale plays in the United States can be replicated in others around the world.
So far the evidence remains thin. Only a tiny number of shale wells have actually been fractured outside North America.
In the United States, shale production has come from nowhere to account for more than 30 percent of gas output, and more than a 1 million barrels per day of crude and condensates, in under a decade.
The U.S. Energy Information Administration (EIA) estimates global shale gas resources could amount to 6,600 trillion cubic feet, similar to conventional gas resources, effectively doubling the resource base. Shale oil resources could be similarly large, though no comprehensive global estimates have yet been published.
In a landmark 2011 study, EIA identified 48 major shale basins in 32 countries, including massive shale plays in China, Argentina, South Africa, Poland, France and the Maghreb. The study did not assess shale basins in the Persian Gulf region or the Russian Federation but these are likely to contain even more oil and gas ("World shale gas resources: an initial assessment of 14 regions outside the United States" Apr 2011).
Many estimates are still being revised higher. The EIA study put the United Kingdom's technically recoverable shale gas resources at 20 trillion cubic feet. The British Geological Survey more conservatively estimated potential reserves at 5.3 trillion cubic feet ("Unconventional hydrocarbon resources of Britain's onshore shale gas" 2010).
More recently, however, shale driller IGas has claimed there could be as much as 172 trillion cubic feet of gas initially in place in just one 300 square mile block in the northwest of England where it has acquired exploration and development rights.
Of course, gas initially in place is not the same as technically recoverable let alone economically recoverable reserves. But if even a tenth of the estimated gas resources is producible with current technology and prices, the potential reserve base would far exceed previous estimates.
BGS is scheduled to update its own estimates this summer, and they are expected to show large upward revisions.
These high estimates have sharply split the oil and gas community.
Sceptics doubt whether the U.S. experience can be repeated elsewhere on any significant scale, and include many prominent oil analysts, as well as conventional producers like Saudi Arabia.
Enthusiasts are convinced the rapid rise in oil and gas output in the United States is merely the beginning of a worldwide revolution that will dramatically alter the outlook for the availability and price of fossil fuels.
The International Energy Agency (IEA) notes cautiously that "fossil fuels are abundant in many regions of the world and they are in sufficient quantities to meet expected increasing demands" but that "resources are not reserves."
"A key role for the industry is to convert resources into reserves" through investment and innovation.
MORE DRILLING NEEDED
Optimistic estimates rest on a very thin base of evidence. Experience with shale development remains confined to a handful of plays in the United States.
The EIA has identified 20 large shale gas and oil plays in the United States, but almost all production so far has come from just a handful of them (including Bakken and Eagle Ford for oil, Barnett and Haynesville for gas).
Drilling and fracturing in other plays has so far been modest, and the results have been disappointing. The same is even true abroad.
Poland has drilled fewer than 50 wells and fractured only 4; flow rates have been disappointing and some energy companies have given up.
China has drilled a couple of dozen wells in the Sichuan basin, its most promising area, but shale gas development lags far behind the government's ambitious programme.
Argentina has drilled only a handful of wells into its giant Vaca Muerta (Dead Cow) formation. France has banned fracking in the Paris Basin, the largest prospect shale play in Western Europe.
For all the hype about its abundant shale gas resources, Britain has only drilled and fractured one well so far, though a second will be fractured this summer.
SHALES ARE NOT ALIKE
The problem is that shales (and other tight oil and gas-bearing rock formations) vary tremendously so it is perilous to draw analogies from one to another.
Gas and oil are diffused throughout the rock in much the same way water is diffused through a sponge. But shales exhibit tremendous variety in terms of the size of the oil and gas-containing pores, how much of the pore space is taken up by water, how much organic material they contained in the first place and how much has been converted into oil and gas by being buried and heated to just the depth and temperature.
These variations matter when it comes to estimating how much oil and gas the shale contains (and how much is recoverable) as well as deciding what techniques to employ to produce it.
In most cases, resource estimates have been done by taking the average thickness and extent of the shale formation to calculate its total volume, then applying estimates of its average porosity, total organic content and thermal maturity to estimate how much oil and gas it might contain.
But without drilling dozens or even hundreds of wells to explore, appraise and develop formations most of these "geology-based estimates" remain subject to tremendous uncertainty. No amount of professional guessing can substitute for actually drilling holes in the field.
The characteristics of an individual formation matter even more in the production stage. Many analysts have focused on the problems associated with producing from unusually deep or thin formations, but clay content can be an even bigger problem. Clayey formations are much harder to fracture and prop open, leading to disappointing flow rates.
A host of other characteristics such as faulting and discontinuities contribute to what geologists and drillers term "complex" formations that are tricky to produce.
In the main U.S. shale formations, exploration and production companies and their field service agents have been able to determine the most efficient way to develop the formation by drilling thousands of holes using a trial and error process.
Play-specific knowledge includes how long the horizontal portion of the well should be, how many separate stages should be fractured, what pressure to use, how much water to employ, what amount of frack sand, and what chemical cocktail to use to maximise recovery.
For other plays, the industry is still at the very beginning of the learning curve for other shale plays in the United States and overseas, and not climbing it very quickly.
The potential of shale gas and oil is clear, but how much can be produced and at what cost is still poorly understood.
Both sceptics and enthusiasts have been too quick to draw sweeping conclusions on the basis of a handful of plays. Cautious optimism is a more appropriate stance until we have more information.
The only way to find out how much shale gas and oil might be available is to start actually drilling and fracturing and see just how much the wells flow. (Editing by James Jukwey)