By John Kemp
LONDON Nov 15 How quickly the shale revolution
spreads from North America to the rest of the world is the
single most important factor affecting the outlook for oil and
gas markets over the next two decades.
For pessimists, the conditions that made the shale
revolution possible in the United States will be difficult to
replicate, slowing the spread of shale oil and gas production.
In its 2013 World Energy Outlook, the International Energy
Agency projects shale oil production will reach almost 6 million
barrels per day (bpd) by 2030, about 6 percent of global
But three quarters of the total (4.3 million bpd) will still
come from the United States. Despite large resources identified
elsewhere, the agency projects there will be only minor
production from shale in Russia (450,000 bpd), Argentina
(220,000 bpd) and China (210,000 bpd), and little elsewhere.
The agency's caution is echoed by the highly respected oil
and gas team at Bernstein Research, who warn that differences
above ground and below ground will slow the spread of shale gas
production in the rest of the world.
According to Bernstein, no other country has the same
favourable alignment of mineral rights with landownership; a
vibrant exploration and production industry matched with deep
financial markets; and extensive network of gathering and
Below ground, Bernstein points to sharp differences in the
quality of shale resources. Every formation, or play, is
different. The countries with a large volume of shale gas and
oil resources are not necessarily those with high-quality shales
that can be developed easily.
Geological conditions in some of the biggest formations in
China, Australia, Russia and Poland are less favourable than in
North America's Bakken and Eagle Ford ("The Great Divergence:
North America, Europe, China and the Making of the Modern Gas
World," Bernstein Research, Nov. 15).
As a result, Bernstein takes a conservative view about how
quickly the shale revolution will spread around the world.
CHANGING THE GAME
For optimists, above-ground and below-ground differences
present a challenge, but are not insurmountable.
Among the biggest optimists is oilfield services company
Schlumberger. But even Schlumberger thinks a new model
will be needed to develop new shale plays in North America and
around the rest of the world: Shale 2.0.
If the first revolution, Shale 1.0, focused on greater
operational efficiency in drilling and pressure pumping to bring
costs down, Shale 2.0 will have to focus on better understanding
of the geology to identify the best-producing parts of the play
and tailor the approach to different underground conditions.
"Simply exporting the Shale 1.0 model will not be
effective," Jeff Meisenhelder, Schlumberger's vice president for
unconventional resources, wrote in an editorial for the July
edition of the Journal of Petroleum Technology.
"Every shale is fundamentally different," Meisenhelder
explained. "From a technical perspective, what works in one
place may not work elsewhere, even in the same play, much less
around the globe."
"For unconventional resource development to advance
worldwide ... we must shift from an obsession with well-centric
efficiency to a concentration on reservoir-centric
"To unlock shale plays worldwide, we need to change the game
itself," he concluded.
GEOLOGY NOT STATISTICS
Schlumberger notes that the first phase of the shale
revolution took almost 20 years to reach maturity. Shale pioneer
George Mitchell started experimenting in the Barnett shale,
Texas, as long ago as 1986. But hundreds of wells had to be
drilled before the technique was perfected.
Even now, up to 30 percent of all the fracking stages in a
Barnett well contribute nothing to production, so the technique
can still be made far more efficient.
"Development strategies pioneered here in North America,
often at great cost, may not translate well overseas,"
Schlumberger acknowledges. Other countries may not have the
political support, drilling resources and capital to drill
hundreds of wells before they hit on the right formula for local
"Few national or international operators are willing to
drill hundreds of expensive experiments before they finally
reach economic production," Meisenhelder admitted.
Unsurprisingly for a company with a large
reservoir-characterisation division, Schlumberger advocates a
more scientific and less statistical approach to developing new
Instead of drilling lots of holes and relying on trial and
error to find out what works, Schlumberger argues a more
geologically driven approach will enable operators to find the
right formula faster.
"The ultimate objective of Shale 2.0 is to unlock the rock
as quickly as possible, and then not forget all that we have
learned about operational efficiency to drive down costs and
accelerate production," Meisenhelder argued.
UNDERSTANDING THE ROCK
Better and faster integration of all survey and drilling
data obtained from a reservoir should enable sweet spots to be
identified more quickly, and cut the number of unproductive
Schlumberger cites best practice from Eagle Ford.
Originally, fracking stages were spaced out evenly along the
length of the horizontal section of the well, something the
industry calls geometric spacing. By doing the same number of
fracks, but spacing them based on geology rather than evenly,
the same number of stages yields 50 percent more output.
The big midcontinent shales in the United States are under
relatively little stress, in stark contrast to many shale basins
North America's shales were deposited at the bottom of
ancient seas and are very brittle, making them ideal for
fracking. Some of China's were laid down at the base of ancient
rivers and lakes, and are much more clayey, which makes them
less easy to fracture.
"Every shale play, indeed every reservoir, is structurally,
compositionally and geomechanically unique," Meisenhelder wrote.
"From a reservoir-centric perspective, each shale requires its
own development strategy."
According to Schlumberger, "Understanding the rock is the
first and most critical key to effective shale development
Of course, there is an element of self-interest in this. But
Schlumberger is right: rather than seeing the diverse nature of
shales as a problem, exploration and production companies and
host countries should view it as a challenge.
It will take time and a lot of money. Bernstein is right to
stress that progress may be slower than the most enthusiastic
shale boosters claim. But the incentives are enormous.
With oil prices outside North America trading persistently
above $100 per barrel, and gas prices in many countries far
higher than in the United States, operators and service
companies have every reason to focus on finding engineering