The Polish Geological Institute  (Państwowy Instytut Geologiczny) will publish its new report on shale gas reserves in late 2013.

Speaking to Natural Gas Europe, Poland’s Deputy Minister of Environment and Chief Geologist Piotr Woźniak emphasised that estimates will be based on data collected from exploratory wells drilled from 2010-2012, by international companies and Polish state-controlled firms.

The previous estimates published by the Polish Geological Institute in March put recoverable reserves of shale gas in Poland at between 346 and 768 billion cubic metres. However, the report was based on archival data, obtained in the second half of the previous century, from wells drilled between the 50s and the 90s.

Mr. Wozniak underlines, that the first PGI report was only a preliminary one. The Chief Geologist, who took the office several months ago adds, that the report “should have been published by his predecessors much earlier, three – four years ago”.

Mr. Wozniak indicated, that this time the Institute will use data from new wells. Under the exploratory concessions regime, companies must pass their data to the ministry till March 2013.

The Chief Geologist predicted that a new report, using those new measurements, will be ready for publication at the end of 2013. He added that in that new report, higher estimates should be expected.

Source: Natural Gas Europe

The Schuman Foundation conference on “Expectations and Reality: What’s next for Shale Gas ?” took place in the European Parliament Information Office in Warsaw on 16 April 2012. The main theme of the discussion was the future of unconventional gas in Poland and Europe following the recently published Polish PGI shale gas reserve estimates and the European Parliament’s Environment, Public Health and Food Safety Committee (ENVI) report on the environmental impacts of shale gas.

Among the experts invited were MEP Boguslaw Sonik  and MEP Boguslaw Liberadzki,  Professor Jan Lubal and Dr. Piotr Kasza of Polish Oil and Gas Institute, and Chemical Substances Inspector Jerzy Majka.

Referring to the ENVI report,  MEP Boguslaw Sonik, report rapporteur, explained that while the document had no direct legislative power, it was very important for the future of shale gas in the European Union. In his opinion, the unconventional gas debate in Europe, which started two years ago, is based largely on myth and fear, hence the need for the European Parliament to adopt an official stance on the issue.

MEP Boguslaw Liberadzki said that in terms of the energy industry’s needs, there were three key requirements to make the environment competitive in the European Union: sustainable economic development, the cost of energy production and, most importantly, agreement among the EU member states. He suggested that shale gas could bring member states together but appealed for the debate on this issue to be less based on emotion and more based on fact. Poland, he continued, should highlight that without shale gas it would be forced to rely on nuclear energy.

Speaking about the potential problems that may arise during shale gas extraction, Professor Jerzy Majka highlighted that accidents cannot be avoided making it necessary for appropriate safety monitoring systems to be put in place. He added that exploration companies should disclose the chemical used in hydraulic fracturing fluids to authorities.

One way to get a handle on the enormity of potentially producible hydrocarbons contained in shale formations is to estimate how much recoverable oil and gas remain within the source rocks in which they were generated as compared to how much producible oil migrated into “conventional” reservoirs.

Applying this illustrative methodology indicates that for every barrel of crude oil in conventional reservoirs that constitute the bulk of global crude oil reserves of 1.3 trillion bbl there are 8 bbl of potentially producible oil equivalents remaining in the source rock that generated that 1 bbl of conventional reserves (Table 1).

While this admittedly simplistic illustration could provoke considerable dissent within the petroleum geology community, it should prove directionally correct. As such, one is talking about a world-scale game changer as source rocks are moved into the producible column.

The resulting increase in potentially recoverable global crude oil of 1.3 trillion bbl,¹ which constitutes a 40-year supply at current consumption rates,² could be material.

Speculation as to the extent of the impact of this transformation on alternative energy supplies, the global economy and geopolitics, while certainly warranted, is well beyond the scope of this discussion.

Discussion

It’s worth remembering that up until, say, the mid 1990s, source rocks, principally shale-based formations, were recognized as only generating and expelling the hydrocarbons that, in turn, charged porous, reservoir-quality formations within the migration limits of this expelled oil and gas.

The source rocks themselves were not considered producible by virtue of very low porosities and permeabilities as compared to the far higher values characterizing reservoir-quality formations. So, while shale source rocks were considered a prerequisite for finding hydrocarbon-charged, reservoir-quality formations, they were largely “unstudied” as potential reservoirs due to the prohibitive economics of their low porosities and permeabilities.

Now that the subsequent evolution and exploitation of horizontal (directional) drilling and hydraulic fracturing have “unlocked” this otherwise unrecoverable shale oil, not to mention shale gas, the notion of what constitutes resource potential is in the process of being radically enlarged.

Tools define resources. Put radically improved exploitation tools in the hands of an exploration geologist and he will significantly increase what constitutes a recoverable resource.

Now that there are tools to economically recover shale-locked oil and gas, shale formations, intrinsically widespread throughout the world, are being “discovered” at a game-changing rate. This process has really just begun.

Speculative estimates of just how much generated oil remains in shale source rocks range between 45% and 95% depending on the geology of the formation and the quality of the estimate.

At one extreme is the vast 9-11 million acre Bakken Source System3 from which little or no oil has been expelled due to the overlying Lodgepole carbonate seal and such likely analogs as the Nordegg member of the Fernie formation of the Western Canada basin in Alberta.^4-6

At the other extreme might be John Hunt’s estimate of 45% remaining in source rocks (both shale and carbonate) for oil generated in the last 100 million years.⁷ EOG Resources Inc., active in the two leading US shale oil plays, the Bakken and the Eagle Ford, estimates that “75% of generated oil [is] still in mother (shale) source rocks.”¹⁴

The overriding issue here is not the competence of the researchers making these estimates but rather the legacy of lack of economic incentives justifying the requisite study of shale source rocks. Accordingly, the understanding of shale source beds as productive reservoirs still pales in comparison to what is known about the behavior of the “conventional” reservoirs that comprise the bulk of the world’s reserves.

As this void is addressed, as often has been the case of analogous instances in the past, shale-based hydrocarbon resource estimates will increase, probably dramatically. A good example of this process is the US Geological Survey, which increased its estimate of Barnett shale recoverable gas resources from 3 tcf in 1996⁸ to 26 tcf in 2004⁹ principally as a result of the implementation of horizontal drilling and hydraulic fracturing.

The subsequent pioneering use of the same tools in the oil-rich Bakken of Montana and North Dakota expanded the estimate of Bakken resource potential from a USGS researcher’s unofficial finding of 151 million bbl in 1995¹⁰ to a published 3.7 billion bbl in 2008.¹¹ Industry estimates utilizing recent data now place Bakken ultimate recovery well north of a 2011 estimate of 24 billion bbl.^{12 13}

Inspired by this pioneering success in identifying an oil-rich shale, a wide ranging search for analogs has already come up with the Texas Eagle Ford, which EOG contends will outstrip even the Bakken.¹⁵

This search is being repeated on a global scale ranging from California’s Monterey shale to shales in Argentina’s Neuquen basin, Canada’s Nordegg formation, France’s Paris basin, Poland’s Baltic basin, and China’s widespread but still largely uncharted shale formations…and this is just for starters.

Clearly, a key variable going forward in determining shale oil reserve potential will be the degree of improvement in currently low recovery rates. However, given the steady improvements in recovery technologies across widely varying reservoir geologies over the last 60 plus years, recovery rates are likely to experience marked improvement.

When one is talking presently of only 4-6% recovery for shale oil, an increase to 10% and, in turn, a doubling of potential reserves, is ultimately likely if the past is any kind of prologue.

Somewhat simplistically, this has all been distilled down to the observation in Table 1 that for every 1 bbl of oil reserves in a “conventional” reservoir, 8 bbl of recoverable oil equivalent could well remain behind in the shale source rock that generated this 1 bbl of reserves.

This, by any measure, should be a world-scale game changer for the oil and gas industry.

Well beyond the scope of this discussion is what impact this transformation could have on the global economy, alternative fuels, and geopolitics.

Source: Oil & Gas Journal

Algeria sees “big potential” for shale gas and plans incentives to encourage exploration as extraction of so-called unconventional resources becomes economically feasible, according to an Oil Ministry official.

Algeria will introduce new legislation to spur investment in exploration this year, including tax incentives that “take account of the production difficulties of this kind of fuel,” said Ali Hached, an adviser to Energy and Mines Minister Youcef Yousfi. “There is big potential,” he said at a Paris summit.

Countries from the U.S. to Poland are exploring for natural gas in shale, which requires the injection of water, sand and chemicals into sedimentary rock at high pressure to extract the fuel. Energy producers have stepped up the search for such unconventional resources as rising energy prices and advances in technology have made such developments profitable.

“Non-conventional resources are important in Algeria,” Abdelhamid Zerguine, chief executive officer of state-run energy company Sonatrach Group, said at today’s summit. Tests in three provinces over 180,000 square kilometers (69,500 square miles) have uncovered a possible 2 trillion cubic meters of gas, he said, adding that “partnerships will be necessary.”

Sonatrach has said it intends to invest $80 billion over five years, with more than 60 percent dedicated to exploration and production. The company plans to drill 150 exploratory wells and expand crude-processing capacity at three oil refineries.

Development of unconventional gas resources outside North America will “take time,” Yves-Louis Darricarrere, head of exploration and production at French oil company Total SA, said in Paris. Total, which is producing shale gas in the U.S. with Chesapeake Energy Corp., is developing the Timimoun and Ahnet gas projects in Algeria and pursuing projects in China.

Source: Bloomberg

This conclusion is the second piece of good news in a week for the U.K.’s nascent shale gas industry, which has struggled to overcome public fears about its environmental safety. A report published by the U.K. government’s Department of Energy and Climate Change last week said hydraulic fracturing could safely resume in the U.K., despite having caused earth tremors in the north of England last year.

Hydraulic fracturing, also known as fracking, releases natural gas trapped in shale rocks by forcing a mixture of water, sand and chemicals underground at high pressure. Much of the opposition to the technique, which has spurred a boom in gas production in the U.S., centers around fears that chemicals could move through rock and contaminate ground water.

The research conducted by Durham University, in conjunction with Cardiff University in Wales and the University of Tromso in Norway, studied records from eight different fracking sites in the U.S., Europe and Africa. Of the thousands of fractures studied, “none were found to exceed 600 meters, with the vast majority being much less than 250 meters in vertical extent,” the report said.

This means that, “the likelihood of contamination of drinking water in aquifers due to fractures when there is a separation of more than a kilometer is negligible” because there is no path for fracking water to reach ground water, the report said.

This is already the case for most fracking operations, because for shale gas, “geological conditions are optimal at 2-3 kilometers depth,” said Richard Davies, director of Durham Energy Institute in an interview with Dow Jones Newswires.

On the Bowland shale in Lancashire, where Cuadrilla Resources Ltd. believes it has found a major shale gas resource, fracking occurs more than 1,800 meters below the aquifer, according to a presentation from the company.

In Poland, the other major hope for shale gas in the Europe, BNK Petroleum Inc. (BKX.T) has been drilling rock formations between 3,000 and 4,000 meters below the water table.

There are examples of where fracking at shallower depths has resulted in ground water contamination, notably the Pavillion field in Wyoming in the U.S., Davies said.

For this reason, “we believe that it may be prudent to adopt a minimum vertical separation distance for stimulated fracturing in shale reservoirs,” Davies said. “It should be significantly in excess of 0.6 kilometers.”

In deeper shale formations in the U.S., such as the Marcellus under New York and Pennsylvania, and the Barnett in Texas, “the chance of fractures going into aquifers is incredibly low,” he said.

Source: Wall Street Journal

The total deposits have been estimated at 128 bcm in the most pessimistic scenario and at 376 bcm in the most optimistic one, with recoverable resources at 25 to 75 bcm respectively, the daily wrote.

If the estimates could be extrapolated to the country level, Poland could be sitting on conditional resources of 4.6 to 13.6 trillion cubic meters of shale gas, or recoverable resources of 1 to 3 trillion cubic meters, much above the recent estimates of the Polish Geological Institute (PIG).

However, experts are skeptical whether all deposits are as rich as in the three license areas.

Source: The Warsaw Voice

If Cuadrilla decides to proceed pending further tests, it would still need approval from the Lancashire County planning authorities, the national Environment Executive and the Health and Safety Executive before obtaining a final go-ahead from the DECC. Only then can it gain a permanent license and start producing gas commercially.

British energy users need all the help they can get. In March U.K. households paid between £9.60 to £11.19 ($15.36 and $17.88) per million BTUs for natural gas, compared to spot prices in the U.S. of about £1.25, or $2. American natural gas prices have plunged in the last decade as shale production has taken off. Britain and Europe could be on the brink of a similar energy revolution—or at least an end to chronic undersupply—if its governments don’t stand in the way.

On that point, the U.K. isn’t the only good-news story. Poland, which is keen to throw off the yoke of dependence on Russian fuel, continues to press forward with shale-gas exploration. Efforts from Greens in the European Parliament to ban or restrict fracking throughout the European Union have gone nowhere.

So far, only France (and Bulgaria) have bought into the anti-fracking hype and banned the practice. With French retail natural-gas prices at least 25% higher than in the U.K., cheaper domestic gas would be a particularly welcome reprieve for the French economy.

Source: The Wall Street Journal

MONETARY POLICY

Poland will face increasing problems with maintaining economic growth in the long run, despite a relatively low level of real interest rates, Monetary Policy Council member Jerzy Hausner wrote in an article co-authored by former finance minister Miroslaw Gronicki.

DNB NORD

DnB Nord, the Polish arm of Norway’s biggest bank DNB , will announce a new strategy next week assuming an abandonment of the country’s retail segment and giving up on plans to launch services for small and medium-sized firms, Puls Biznesu wrote citing a source at the bank.

SHALE GAS

Poland’s shale gas reserves might amount to 1-3 billion cubic metres, a few times more than estimated in a state study from March, Dziennik Gazeta Prawna wrote in a comment to a report by Canada’s LNG Energy on estimates of resource volumes at its three licences in the Baltic basin.

SWEETER BID FOR EM&F

Czech private equity group Penta Investments and investment group Eastbridge raised their joint bid for Polish retailer Empik Media & Fashion (EM&F) on Friday, valuing the group at nearly 1.1 billion zlotys ($349 million).

Source: Reuters 

While environmental groups continue to raise concerns about the risks to water supply posed by extracting shale gas – a process known as hydraulic fracturing or ‘fracking’ – Ambassador Richard Morningstar called on policy makers not to rule it out until further investigating. “The EU should not let politicians hijack the precautionary principle” the way it did with genetically modified organisms (GMOs), the ambassador said during a conference on transatlantic energy security organised by Johns Hopkins University in Washington DC, on 26 April. “If you insist on a ‘zero risk’ principle, nothing will happen because you can’t prove a negative,” he argued.

Recent explorations indicate that there are significant shale gas deposits in Europe, including in Poland, Ukraine, France and Lithuania. While Morningstar was anxious for the EU not to reject shale gas out of hand as a solution to its energy shortages, another speaker, David Koranyi, an energy policy researcher at the Atlantic Council think tank, said “I think the overall approach of the European Commission is quite positive” on shale gas, and he did not expect “serious impediments for fracking in Europe”. Also addressing the conference was a representative of US oil and gas company Chevron, Gregory Hild, who insisted that fracking was “a proven and safe technology,” although he admitted “it is not risk-free”.

Rival Plans Overtake Nabucco

The ambassador also weighed in on a major hot button issue of the day: the questionable future of the EU-backed Nabucco gas pipeline project. While the US strongly supported the so-called Southern Corridor – the multiple pipeline projects aimed at bringing more non-Russian gas to Europe – “we do not think that Nabucco will be the initial pipeline,” he said. “We support any of the alternatives” to Nabucco as long as those pipelines were “expandable” and “supply gas to vulnerable countries,” he added.

In that context, he felt that Hungarian Prime Minister Viktor Orbán’s recent remarks indicating that Hungary may pull out of the Nabucco project was “non-news” as it had been clear “for the past year” that Nabucco would not be the initial pipeline. The three Southern Corridor projects are Nabucco, the Trans-Adriatic Pipeline and the Interconnector Turkey-Greece-Italy. Asked if he thought that Turkey, still a partner country in the Nabucco project, was undermining European energy security by proceeding with separate pipeline projects with Azerbaijan and Russia, he said “I am fully confident that Turkey will continue to be a reliable transit partner”. Though the source of Nabucco’s gas remains unclear, the transit countries are supposed to be Turkey, Bulgaria, Romania, Hungary and Austria.

Source: Europolitics

A moratorium against shale gas activity in Bulgaria could be soon lifted following talks in parliament, Bulgarian MEP Iliyana Yotova has said.

The first steps to lifting the ban will reportedly be undertaken today during a council meeting with the Bulgarian president, during which shale gas would be discussed.

“The future of shale gas exploration in Bulgaria is unclear,” the Focus News Agency reports Ms. Yotova as saying. “The moratorium is a temporary measure.”

Ms. Yotova also intimated today on a statement on her website that Bulgarian Minister for Energy Delian Dobrev may call for the shale moratorium to be lifted as soon as today following the meeting.

“Yesterday I received unofficial information from the country that today, the first Advisory Board under President Plevneliev at the point of energy security of the country will try to withdraw the moratorium, arguing that the moratorium on shale gas studies is preventing [activity in] conventional gas and the preparation for studies at the landfill in Chiren,” she said.

“I got this information from experts who obviously were asked in that direction.”

A moratorium on shale gas exploration and stimulation has been in effect since January this year, following an overwhelming 166 to 6 votes from MPs to ban the practice until further study had been done. As part of the moratorium, a shale gas licence granted to US company Chevron was revoked.

Chevron has maintained that it will do all it can to alleviate the fears of the Bulgarian people in relation to shale activity and its impact on the environment.

Source: Natural Gas for Europe