(John Kemp is a Reuters market analyst. The views expressed are
By John Kemp
LONDON, June 7 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
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
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
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
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
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
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
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
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
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)