Jan 25

San Leon Energy Plc Announces Completion of Morocco 2D Seismic Campaign

By Curve San Leon Energy No Comments »

 

Wednesday, January 25th, 2012

San Leon Energy Plc (AIM:SLE) (“San Leon” or the “Company”) is pleased to announce that it has completed the acquisition of more than 2,280 km of 2D seismic across its Tarfaya and Zag Licenses onshore Morocco. The data was acquired by San Leon Energy’s wholly owned subsidiary, NovaSeis.

608 line km of high density 2D seismic data was acquired on the northern portion of the San Leon operated Tarfaya License across the J North prospect. This adds to the existing 2,289 line km of existing 2D seismic across the license. The Netherland, Sewell & Associates 2008 CPR placed 156 million barrels of recoverable prospective oil resources in the J North prospect with upside potential of more than half a billion barrels. In total San Leon currently has 12 leads and prospects across the Tarfaya license with net prospective resources of 711 million barrels of oil equivalent based on the Netherland, Sewell & Associates 2008 CPR. Several new adjacent leads have also been identified around J North as a result of the new 2D seismic data.

The new seismic data quality is significantly improved compared to previous 2D seismic data in the area as a result of longer offsets and higher density acquisition. The new data is currently being processed and interpreted by the Company in its Warsaw office.

1,674 km of 2D seismic data was acquired across the San Leon operated Zag License in Morocco (greater than 5 million acres). This is the first seismic data ever acquired across the Zag License. The combined Zag Basin aeromagnetic survey acquired in 2009 by San Leon and the adjacent license to the north was the basis for the layout of the 2D program. The Company is focusing on the Zag license for both conventional and unconventional oil and gas potential. The unconventional gas potential is primarily within the Silurian interval, whilst the conventional oil and gas potential is in the Ordovician and Devonian intervals.

The Company will continue integrating the new seismic results into its existing basin model in preparation for opening a data room to seek partners for the exploration drilling phase. Any future exploration activities in the Southern provinces will, as they have been to date, be in accordance with international law.

NovaSeis (“the Crew”) was established by San Leon to acquire its onshore seismic data at lower cost with the flexibility to optimise acquisition parameters in difficult data areas. The Crew currently has 1,200 channels of Geospace Technologies (subsidiary of OYO Geospace) cableless GSRs with five Sercel NOMAD vibrators. The Company plans continued investment into NovaSeis to expand its capabilities to 3D acquisition this year as part of upcoming seismic acquisition programs in Poland. While NovaSeis was created to serve the needs of the San Leon Energy group, it is also available to acquire revenue-generating projects outside the Company.

Oisin Fanning, Chairman of San Leon, commented:

“We view Morocco as a long term project for the Company with significant upside over a huge unexplored area. The excitement of the potential of Morocco is based upon the significant production in the same basin in Algeria as well as the huge potential for a Silurian shale gas play. The completion of our seismic program is the next step in bringing our projects closer to drilling.

I am also very pleased with our investment in NovaSeis which has helped us acquire high quality, low cost seismic and given us the flexibility to acquire more data per line km than we could have using a more conventional cable acquisition system. The next step for NovaSeis is to return to Poland where the wireless system will make a real impact by significantly reducing the surface impacts of seismic acquisition while giving us the flexibility to acquire data in areas that a traditional system would not be possible.”

Source: San Leon Energy

 

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Jan 12

Shale Gas Technology: 30 Years in the Making

By Curve natural gas in Europe, unconventional gas No Comments »

 

Natural Gas for Europe tells us all about a research institute where unconventional gas is nothing new:

While unconventional gas was below the radar until the last several years in the United States, one research institute there has been working on the topic for decades.

According to Trevor Smith, Program Manager in Unconventional Gas Sustainability, the Gas Technology Institute (GTI) had been working on unconventional gas development for the last 30 years, and that included coal bed methane and shale gas studies. He told delegates in attendance at the European Autumn Natural Gas Conference in Paris, France of the Institute’s experience with unconventional gas.

He explained that GTI, which was based in Chicago, had 250 staff, and was the only not for profit in the US focused solely on natural gas.

“Although the technology has been developing for over 30 years, the stakeholders have only known about it for a short time. Society’s reaction so far has been mixed,” he explained. “A harsh spotlight has been based on the industry’s practices.”

“Industry knows the technologies are proven,” he contended. “For those outside the industry, technologies appear new, novel, dangerous, untested.”

Mr. Smith said it was necessary to separate the facts from fiction regarding the technologies – hydraulic fracturing and horizontal drilling – in Europe.

“This has occurred because of a significant vacuum,” he said of the public’s misconceptions. “There is little information about the science behind the technology. In the absence of good information, some people have formed their own conclusion.

“More difficult to change people’s beliefs after the fact,” he added.

He noted that instead of talking rationally with other groups, those protesting against unconventional gas “climbed up on ladders and shouted their judgments.”

“It’s as much about the science of human behavior as it is about unconventional gas technology,” explained Smith, who touched upon the environmental issues, real and perceived.

He said: “Water is obviously at the core of the environmental debate. Greenhouse gasses are at the forefront of people’s minds when they think about shale gas.”

His presentation showed a typical well site in the US, a farmer’s backyard in Arkansas, on which one could see construction debris, road damage, and the drilling footprint.

Smith commented: “With these images it should be no surprise about the lack of comfort over shale gas production.”

He went on to mention a better solution for Europe: multiple wellheads on a single well pad.

“Wells should be constructed with great integrity,” he said. “Fraccing fluids should not find their way into shallow sources of potable water.”

According to Mr. Smith, sound regulation built public confidence, as did a commitment to sustainable development.

“We must acknowledge that there are environmental impacts and that these impacts can be managed,” he concluded.

Source: Natural Gas for Europe

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Jan 12

Editorial Touts US as the Saudi of Shale

By Curve global energy landscape, USA No Comments »

 

This editorial on Investors Business Daily asks what is next for the Obama administration and the gas industry:

After enduring a holiday season with gasoline prices at all-time highs, Americans are now dealing with record high prices to begin a new year. Does the president plan to do anything?

When Barack Obama took office three years ago, gasoline was less than $2 a gallon. The national city average for a gallon of regular was $1.79. On Monday, that same regular gasoline cost $3.37, the highest mark ever to start a new year and nearly a full quarter higher than the start of 2011.

Consumers probably saw this coming while Christmas shopping. Gasoline hit $3.21 gallon, a record for the season and an increase of 23 cents over the Christmas 2010 price — the previous record, according to the Heritage Foundation, until it was broken in 2011.

If gasoline prices aren’t an issue at this point in the presidential campaign, they could be by summer. Patrick DeHaan, a senior petroleum analyst for GasBuddy.com, told the Los Angeles Times that the gas hikes are “setting up an ugly year for motorists.” So ugly, DeHaan told ABC, that by Memorial Day he expects gasoline will be $3.86 to $4.13 per gallon.

We know what the Republican candidate will propose to bring down prices. But what will Obama, who, unlike his GOP opponents is in office where he can have an impact, do?

Will he change his mind and agree to let the Keystone XL project proceed? While crude shipped through that pipeline won’t be on the market as gasoline for years, giving the project the go-ahead will affect near-term prices as the market reacts to the certainty of increased supplies in the future.

Will the president lower the barriers to development? Heritage reports that “less than 6% of federal lands and 2% offshore are open to exploration, limiting the potential of Americans to produce energy here at home.”

Doubling both those figures would bring prices down and still leave large chunks of federal and offshore zones off-limits to drilling.

Will Obama back off his administration’s assault on shale oil and gas? With the largest supply of shale resources in the world, the U.S. is sitting on an energy gold mine waiting to be developed. America is the Saudi Arabia of shale.

In fact, U.S. shale has about eight times as much oil as Saudi Arabia’s sand.

The president isn’t likely to choose any of these options — or any of the many other possibilities available to him that would increase energy production. His administration is so opposed to drilling that it even ignored U.S. District Court Judge Martin Feldman’s order to lift a drilling moratorium that it imposed in 2010.

Even so, Obama will ask consumers who’ll be paying as much as $300 more this year for gasoline than they did last year for their votes in November.

They shouldn’t give them to him. The country doesn’t need another four years of an elitist president who chokes the power of the market consumers so that he can placate narrow interests.

Just as Judge Feldman did, the voters should hold him in contempt.

Source: Investors Business Daily

 

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Dec 15

Benefits of Shale Gas Outweigh the Risks

By Curve natural gas in the USA No Comments »

 

In a week where shale gas = job creation stories, Deloitte has issued a report which says opinion on shale gas is positive, particularly when it comes to employment:

A majority of Americans think developing natural gas by tapping shale formations offers greater rewards than it does risks, including those associated with hydraulic fracturing, according to a survey conducted by the Deloitte Center for Energy Solutions. Moreover, 8 in 10 respondents link natural gas with job creation and economic revival.

Specifically, 83 percent of respondents agree that natural gas development can stimulate job growth in the United States, while 79 percent believe the development of natural gas resources can help revitalize the economies of the states and communities where shale gas is located.

Further, the survey indicates that the public associates jobs in the natural gas industry with good pay. More than half (56 percent) of respondents in areas where shale gas development is planned or underway believe that jobs producing gas from shale formations command a “much” or “somewhat” higher pay grade than the average in their communities. The number jumps to 62 percent when looking at relatively mature shale regions like Texas.

Peter Robertson, an independent senior adviser for oil and gas at Deloitte, points out that the role of natural gas in job creation and economic revival is only going to grow as production of shale gas ramps up. Citing a separate Deloitte research project, Robertson points out that “shale gas made up a small share of domestic natural gas production in 2005, but has surged since then – and in 2010 made up 20 percent of what is produced domestically. By 2030, the portion could be close to 50 percent.”

Shale benefits seen to outweigh risks

Only 2 in 10 respondents (19 percent) feel the risks of developing shale gas “somewhat” or “far” outweigh the benefits; 58 percent believe the benefits outweigh the risks; and almost 25 percent are unsure.

Moreover, a clear majority of respondents (58 percent) in areas where shale development is underway or planned would recommend that their family and friends lease their land to a shale gas developer. In fact, 7 in 10 survey respondents (71 percent) in established shale areas like Texas, Louisiana and Arkansas would advise family or friends to lease their land to a natural gas developer.

The survey consisted of 1,694 online interviews conducted in November 2011 with adults age 21 to 74 and examined three different audience segments: residents of areas where shale gas development is an established phenomenon, specificallyTexas, Louisiana and Arkansas (537 respondents); residents of areas where shale is a newer phenomenon, specifically New York (89 respondents in New York City and 162 in western New York State) and Pennsylvania (243 respondents); and finally, the survey canvassed an additional 663 respondents in the United States nationally.

“The survey findings are especially interesting among the more mature shale areas where people are long-accustomed to oil and gas development,” said Gary Adams, vice chairman, Deloitte LLP, and leader of Deloitte’s oil and gas practice. “There, 8 in 10 respondents who currently do, or ever have, leased their land to a natural gas developer (83 percent) would do so again.”

As Adams points out, in contrast, these numbers are lower in newer shale regions – indicating a higher level of discomfort with the processes and technologies involved in shale gas development. “In Pennsylvania and New York, where people are not as used to oil and gas development, a more modest majority of respondents (52 percent) would advise family or friends to lease their land to a natural gas developer. Similarly, a slimmer majority of respondents who currently do, or ever have, leased their land to a natural gas developer (53 percent) would do so again,” Adams adds

Shale seen to improve energy independence and air quality

The survey also indicates that shale gas could play an increasingly important role in making America more energy independent: Respondents with at least some degree of familiarity with shale gas development view energy independence as the single most important benefit of shale – ahead of all other benefits, including: boosting the national economy, job creation, cleaner air, and boosting local economies. And a near majority (47 percent) of national respondents believes shale is “extremely” or “very” impactful on energy independence.

In addition, survey respondents believe shale gas development could improve air quality: 6 in 10 national respondents (62 percent) with at least some degree of familiarity with shale gas development associated the word “clean” with natural gas – making it the top association over other words such as: reliable (47 percent), domestic (41 percent), affordable (40 percent) and abundant (38 percent). Finally, 88 percent of all national respondents think it is at least “somewhat believable” to claim that “using natural gas resources to generate electricity can significantly reduce our carbon footprint.”

Strong need for better dialog, more information on shale

Still, the road to increased shale production is likely to be rocky. There is controversy about the environmental impact of shale development and heated rhetoric – all of which was reflected in Deloitte’s survey.

Most notably, respondents are not familiar with the processes involved in shale gas production: 37 percent of national respondents report being “not very” or “not at all” familiar with hydraulic fracturing – and 23 percent “never heard of hydraulic fracturing.”

Nonetheless, a large percentage of the public is aware of the dominant concerns about shale development. 58 percent of national respondents with at least some degree of familiarity with shale gas development are aware of potential water contamination issues and 49 percent know about the potential for surface-land impact issues.

Curiously, while the news media is seen as the primary source of information on shale (much higher than sources like word-of-mouth, non-profits, industry websites, academics and town hall meetings), it is not trusted: 73 percent of respondents nationally get information about shale development from the news media, yet only 17 percent see the media as “extremely” or “very” trustworthy when it comes to providing unbiased coverage of the natural gas industry.

At the same time, respondents in areas where shale gas development is planned or underway indicate that oil and gas production companies need to communicate better. While nearly half (45 percent) believe shale gas producers are “somewhat” transparent and open, just 35 percent believe shale gas companies communicate “extremely” or “very” effectively. Only 34 percent see shale gas companies as “extremely” or “very” trustworthy.

“There’s so much shale activity in so many parts of the country that it’s important to communicate and operate effectively,” said Robertson. “Everything shale gas producers do gets enormously magnified. That’s why they have to get it right every time, on every well drilled. Consistently operating with excellence and communicating effectively with all impacted stakeholders are critical attributes.”

Interestingly, the survey shows that there is faith that the shale development is currently being regulated appropriately: 54 percent of respondents nationally believe that regulation of shale development is “just right” or “evolving, but on the right track.” Approximately 20 percent think there is too much regulation and 16 percent think there is too little regulation. Ten percent are not sure.

Source: Deloitte

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Dec 15

Shale Gas Could Create A Million Jobs by 2025

By Curve shale gas No Comments »

 

Cheap natural gas flowing from the newly developing shale formations could support the growth of a million new jobs in manufacturing by 2025.

“Full-scale and robust shale gas development would likely have a number of knock-on effects for other industries, particularly the manufacturing and chemical sectors,” reads the report “Shale Gas: A Renaissance in U.S. Manufacturing?” released Dec. 14 by Pricewaterhouse Coopers.

Given a scenario of high gas production and resulting low gas prices, manufacturing and the broader economy could benefit in several ways, the report says.

Shale gas development already is driving demand for products, according to chemical, metal and industrial manufacturers’ annual SEC filings, and that will only grow, the report’s authors wrote.

At the same time, lower feedstock and energy costs could help manufacturers reduce natural gas costs by more than $11 billion a year through 2025, they wrote.

The combination of demand by the growing industry and affordable energy could mean a million new jobs by 2025.

Chemical and metals companies stand to benefit the most over the next several years, according to the study.

With lower feedstock costs, the chemical industry can justify greater capital expenditures in the U.S. — a situation already visible in the discussion of one or more ethane crackers in this region.

Metals companies will experienced increased demand as more drilling equipment is needed.

To achieve gas’s potential for manufacturing, manufacturers will need to become stakeholders in the gas industry.

“Such advocacy means supporting certain tax and regulatory issues promoting growth of the industry, as well as supporting environmentally safe and transparent gas extraction methods and public education and community outreach programs,” the report’s authors conclude.

Source: Statejournal.com

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Nov 11

Study: No Link Between Hydraulic Fracturing and Groundwater Contamination

By Curve shale gas No Comments »

 

Some interesting findings for shale gas critics.  Preliminary investigations from a study by the University of Texas Energy Institute suggests there is no link between the process used in shale gas extraction operations and groundwater contamination.

The study’s leader, Charles “Chip” Groat, a UT geology professor, noted that the dangers associated with shale gas drilling — which is accomplished by hydraulic fracturing, a process commonly known as fracking — are largely the same as other oil-drilling operations.

“Hydraulic fracturing doesn’t seem to be of concern to groundwater,” Groat said. “If there has been water contaminated related to shale gas development let’s not look at fracturing, let’s look at surface processes.”

Read the full article: Statesman.com

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Nov 01

Hydraulic Fracturing To Revolutionize World Energy Markets

By Curve hydraulic fracturing No Comments »

 

The development of the extraction of gas is a potential game-changer in world energy markets, offering ample supplies in markets that could otherwise tighten in coming years.

In the United States, hydraulic fracturing, a recently developed method of shale gas procurement, has the potential to flip the country from a net importer of natural gas to a net exporter.

Shale gas now accounts for one quarter of all U.S. gas production, and the Energy Information Administration (EIA) forecasts that this proportion will double by 2035.

In Europe, according to a study by IHS Cambridge Energy Research Associates, production levels from unconventional gas sources including shale could range from 60 billion cubic metres (bcm), less than half of current shale gas production in North America, to 200 bcm by 2025.

Below is a summary of key facts and challenges around existing and potential shale gas extraction.

Shale is soft, finely stratified sedimentary rock that formed from consolidated mud or clay.

Hydraulic fracturing, known as fracking, is the process of creating small cracks, or fractures, in underground rock formations as much as 7,700 metres below ground level to extract gas (and oil) from shale.

Before fracking for gas begins, geoscientists assess the permeability and porosity of rock formations and thickness of the targeted shale formation.

Once a potential site has been chosen, a hole is drilled deep into the ground vertically and then horizontally, placing frack plugs into the shaft.

A liquid mixture including large amounts of water, chemicals and sand is then pumped into the well.

The liquid goes into the holes created in the well bore and into the surrounding rock formations, fracking the rock and injecting the liquid into the cracks to hold them open.

Water pressure is reduced and fluids are carried up the well bore for disposal or treatment and reuse, leaving sand in place to keep the cracks open and let gas flow up to the surface.

Although shale technology offers large amounts of potential energy resources, it may not be viable in some regions due to political, environmental, legal and economic difficulties.

According to research from the University of Pittsburgh, use of hydraulic fracking to extract shale gas is extremely expensive.

Drilling just a single shale gas well can add $2.5 million to the overall total cost for a conventional well of up to $7.6 million on average, according to the research.

In the United States it is estimated that prices of $5.50 per million British thermal units (Btu) to $6/mBtu are needed for shale gas production to be economically sensible.

In Europe, shale gas would compete with conventional sources of gas supplies and liquefied natural gas (LNG) imports, and many analysts predict shale extraction will remain too expensive in Europe to compete with these sources.

The Economist Intelligence Unit forecasts that climbing U.S. demand means that the price of gas will rise over 20 per cent in 2012 and 8 per cent the following year, pushing prices up by late 2012 or 2013 towards $6 per million Btu.

Environmentalists in the United States say potential water contamination caused by fracking is a major cause for concern.

Chemical-laced fracking fluid can seep through rock fissures into local water wells, and escaping methane from poorly cemented wells and fluid can spill into local rivers and streams, they say.

Fracking requires the treatment of fluids that flow back to the surface after the process is complete. U.S. companies now reuse much of the returned fluid, but they need a large water treatment capacity to return the liquid to an acceptable grade.

Those on the production side say chemical spills are unlikely and that there is no proof fracking causes flammable tap water experienced in Colorado and Pennsylvania.

They also say shale gas is a useful way of cutting carbon emissions, producing little more than half as much CO2 per unit of energy as coal, although some research suggests methane is a worse pollutant.

In April a blowout of a well in Pennsylvania led to fluid spilling into local waterways, heightening the debate about the safety of fracking fluid.

U.S. authorities such as those in New Jersey have banned fracking, helping to fuel opposition in other countries. In May 2011, the French government banned hydraulic fracturing on the basis of environmental concerns, in effect nullifying exploration licenses issued in 2010 to Schuepbach Energy and Total.

Europe also faces legal battles on property rights.

While U.S. landowners also own the resources in the ground, Europeans generally do not have the right to privately sell commodities found on their land.

Source: Vancouver Sun

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Oct 28

Sterling Eyes Romanian Shale Gas

By Curve natural gas in Europe No Comments »

 

Sterling Resources Inc. is interested in exploring shale-gas blocks in the southern Romanian region of Oltenia.

Alexandru Patruti, head of the Bucharest-based Mineral Resources Agency, disclosed the information while speaking at an energy conference today in Bucharest.

Any company that has permits to explore oil and gas in the country may also explore resources of unconventional gas, Patruti said.

In July 2010, Chevron Corp submitted winning bids for three shale-gas exploration blocks in the south-eastern region of Dobrogea, totaling 2,700 square kilometers. The company also has exploration rights for a block in Barlad (Eastern Romania). MOL Group has also expressed an interest in searching for unconventional gas in the nation.

Sterling today announced that it had reached agreement with the Government of Romania on a package of issues that will resolve the notice of dispute filed on June 20th, 2011.

At a meeting with Ion Ariton , Minister of Economy, Commerce and Business Environment and the President of the National Agency of Mineral Resources (NAMR), an agreement was reached to grant assignments to Sterling’s designated partners, PetroVentures International Ltd. (20%) and Gas Plus (15%).

In addition, the Government will confirm that all of Sterling’s offshore licenses will now initially run to May 2014 with two further extension periods, each of three years in duration. The Company and NAMR now expect to finalize the administration of this resolution within 10 days.

“While we must still receive the final documentation on the agreements reached, we can confirm that meetings held today in Bucharest herald a new era in our future plans in Romania. The recent amendment to the Construction Permit Law, the granting of assignments and a resolution on our license periods will enable Sterling to resume work activities and investments in the Romanian Black Sea,” stated Mike Azancot, Sterling’s President and CEO.

In April, Sterling has declared Force Majeure on its Midia and Pelican Blocks in the Black Sea after it was unable to undertake operations for reasons it said were outside of its control.  Sterling claimed that lack of clarity on the applicable procedure and authority for issuance of construction permits constituted Force Majeure under its Concession Agreement.

Source: Natural Gas for Europe

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Oct 27

Russia Could Help Boost Polish Shale Agenda

By Curve natural gas in Europe, Poland No Comments »

 

Poland will get an additional incentive to push forward with shale gas projects if Russia’s Gazprom refuses to lower multi-year gas prices, Deputy Prime Minister Waldemar Pawlak said on Wednesday.

Polish gas monopoly PGNiG said it would seek an agreement with Gazprom by end-October on a price cut under their long-term deal and, if unsuccessful, would then turn to an arbitrage court.

“Some activity on the government level would certainly do no harm to signal our expectations,” Pawlak, who also serves as the energy minister, told Reuters.

Poland imports some two-thirds of its annual gas consumption of 14 billion cubic metres from Russia, and diversification of supplies has for long been high on Warsaw’s agenda, with its focus lately turning to potential shale gas exploration.

“Our agreement runs until 2022, and by then with relatively good technical capabilities, there will be a chance to match demand with shale gas supply, and this is a new element in the discussion. We can either buy cheaper conventional gas or move quicker on shale gas extraction,” Pawlak said.

Poland hopes to start shale gas production as soon as in 2014 after a study by the U.S. Energy Information Administration estimated it could have some 5.3 trillion cubic metres of recoverable reserves, though that has not been confirmed so far.

The government granted over 100 exploration licences, and three companies recently said they had hit some shale gas deposits.

Source: Reuters

 

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Oct 21

Is Shale Gas the Answer..?

By Curve natural gas in Europe No Comments »

 

The future of natural gas exploration in the UK is constantly changing – here, one reporter shines a light on just how much gas could be lying under the ground.

It has long been gathering momentum across the Pond, with first exploration having occurred in the 1970s, leading to an increasingly important source of natural gas for the country. In 2000, the US recovered just 1% of its gas from shale; today that figure stands closer to 30%.

Little wonder, then, that the UK’s ears have pricked up at the suggestion that this source of energy could help to offset the decline in more conventional sources.

“A decline in domestic production is already well underway in the UK, with volume dropping by 9% annually on average since 2004. Even in the Netherlands, one of Europe’s largest exporters, gas production will likely begin to fall towards the end of the decade,” explained a commodity analyst at Deutsche Bank.

“Recent estimates of the total reserves contained in UK shale-gas deposits hold out the hope that the decline in UK production could be slowed in coming years.”

Cuadrilla Resources announced last month the discovery of 200 trillion cubic feet of gas in Lancashire, noting that commercial production could start as soon as mid-2013.

With huge swathes of the country now up for grabs in a new round of gas exploration licences, interest in unconventional gas has reached fever pitch.

The British Geological Survey has estimated the UK shale-gas reserve potential at 150 billion cubic metres (bcm), while the US Energy Information Administration (EIA) estimated technically recoverable reserves at 560bcm in April.

“The potential for unconventional gas is far higher than that of conventional gas,” said John Westwood, chairman of Douglas-Westwood. “I believe unconventional gas drilling and production is going to soar.”

And in a boon for the industry, the UK government’s position on unconventional gas is positive for shale-gas prospects.

The UK Environment Agency has previously reviewed and approved drilling plans in the Bowland Basin, while Charles Hendry, minister of state for the Department of Energy and Climate Change, has been a vocal supporter of unconventional gas exploration for its potential in increasing energy security.

But it doesn’t come without its complications.

Shale gas, the by-product of shale rock, has come under fire from protestors for being environmentally unsound.

Campaign groups have expressed concern over the effect hydraulic fracturing, or fracking, will have on the environment, as it involves the high-pressure blasting of rocks with a mixture of water, sand and chemicals.

There is also considerable uncertainty regarding the size of the recoverable resource and the production rates that could be sustained.

And in addition, one must take into account the expense. European shale-gas ventures are looking at high well costs in the region of $6.5 million (c£4.1 million) to as much as $14 million, in comparison to $4 million in Pennsylvania.

“As exploration investment rises, new drilling companies enter the market, and competition increases, costs are likely to fall. However, we would be hesitant to claim that this would necessarily reduce costs to the level of current US projects since labour costs, health and safety regulations, and more stringent environmental requirements may result in a persistently higher cost base,” said Deutsche Bank.

Owing to advantages in drilling services infrastructure, mineral-rights law and population density, the US is arguably better equipped to develop shale-gas resources.

But this won’t stop the UK and its European compatriots.

Deutsche Bank concludes: “Overall we believe that shale-gas developments worldwide have the potential to add meaningfully to gas production in the long term, provided that the industry can allay environmental fears and cost-effectively minimise the impact felt by local populations.”

Source: Interactive Investor

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