Sep 01

Ukraine Awards First Shale Contract to Shell

By Curve shale gas in Europe No Comments »

 

Ukraine opened shale gas development to Western giants on Thursday, assigning its first exploration contract to the Anglo-Dutch firm Shell in a deal worth up to $800 million (555 million euros).

“In case of successful exploration work and the start of intense project development, Shell’s total investment under the agreement may come to $800 million,” the state-own Ukrgazvydobuvannya gas exploration company said.

Ukraine is widely believed to be one of Europe’s largest holders of the new energy resource with estimated reserves up to 1.5 trillion cubic metres, according to industry analysts.

But it lacks the technology to reach the deeply-buried rock that can be transformed into fuel in a difficult operation called fracking, and continues to rely heavily on gas imports from its eastern neighbour Russia.

The decision to award the contract to Shell comes amid a swell of foreign interest in Ukrainian shale, with such gas production already booming in the United States and slowly beginning to make its way into Europe.

Other Western majors as Chevron and ExxonMobil have also expressed an interest in Ukrainian shale projects, and the Anglo-Russian joint venture TNK-BP signed a preliminary agreement with the government in October.

The deal also coincides with a drive by Ukraine to reduce the price for the gas it buys from Russia, with the two sides now engaged in a new row that threatens to disrupt European supplies for the second time since 2009.

“The time will come when Ukraine will meet all of its own gas needs,” news agencies quoted Prime Minister Mykola Azarov saying after the signing ceremony.

“This is the first big joint activity agreement capable of quickly raising gas production in our country,” added Energy Minister Yuriy Boiko.

The agreement will see Shell dig up to 1,000 exploration wells in northeastern Ukraine, each of which will run up to six kilometres (3.7 miles) below ground.

With the rock buried so deeply and no technology available for reaching it, Ukraine has never officially studied how much shale it might actually have.

Neither Shell nor Ukraine has estimated how much gas may be hidden in the six blocks awarded to Shell near northeastern city of Kharkiv.

But the agreement could lead to the first successful development of shale in Ukraine, providing Shell with privileged status in a potentially huge market.

Shell launched its operations in Ukraine in August 2006 when its signed a broad agreement covering both oil and gas exploration.

The company has previously operated by holding 50-50 stakes in local joint operations ventures, while not getting rights to the fields themselves.

News reports said Thursday’s agreement will see Shell make the operating decision in the project, with more strategic moves decided jointly with the state-run company.

Source: AFP

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Apr 19

US report boosts interest in Poland’s shale gas potential

By Curve Poland No Comments »

Realm Energy was mentioned in an article from today’s Warsaw Business Journal:

A new report published by the United States Energy Information Administration (EIA) estimates that Poland’s shale-gas reserves are more substantial than previous assessments suggested. Energy and natural resources consultancy Advanced Resources International (ARI) had previously estimated Poland’s shale gas reserves at some three million cubic meters (tcm) but the EIA’s latest analysis released April 5th suggests 5.3 tcm of shale gas could be sitting beneath the surface.

If correct, this could become a real geopolitical game-changer for Poland. Specifically, it would enable Poland to diversify its energy portfolio (away from domestic coal and Russian natural gas), develop as an energy exporter (while increasing domestic natural gas reserves) attract much-needed FDI and strengthen commercial interests in the sector, especially from the United States.

…

So far, Poland’s Environment Ministry has granted 85 concessions for exploration. Last month, Dutch-British giant Shell announced that it too was looking to join the long list of international energy companies exploring shale gas reserves in Poland, which already includes the US’s Exxon Mobil, Conoco Philips and Chevron.

In addition, smaller firms such as Canada’s Realm Energy International and the UK’s San Leon Energy and Aurealion Oil and Gas have acquired leases and exploration rights.

Read the full article at Warsaw Business Journal.

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Jan 25

International Shale Gas Propels U.S. Technology (and Profits)

By Curve shale gas No Comments »

Seeking Alpha contributor Kent Moors published a very informative article on shale gas today:

Last week, there was a meeting on shale gas that was standing room only. That’s hardly major news these days, as producers, consumers, environmentalists, analysts, regulators, and, oh yes, investors all focus upon the new major player in the energy market.

Except this meeting took place in The City – London’s financial district.

This may come as a surprise. After all, the way the European Union structures its energy pricing makes it more difficult for companies to make a profit.

On the other hand, rising dependence on imported gas (especially from Russia) does not sit well with Brussels.

Domestic shale gas, therefore, is increasingly regarded as the solution.

It will not eliminate the need for imports. But it may well allow Europe to renegotiate terms on pipeline contracts. And that’s more than enough to accelerate the interest in shale gas.

Gas in Europe, the Middle East, North Africa, Asia…

Now, the U.K. itself has some possible shale plays, but that nation has barely even begun to estimate the possibilities.

Elsewhere in Europe, the development has advanced beyond the discussion stage. Production is underway in Sweden (Alum), Hungary (Makó Trough, Szolnok), Austria (the Vienna Basin),and Germany (Lower Saxony).

But the real breakthroughs are likely to come from five major plays in Poland, three in France, and Ukraine – where there may actually be more shale gas potential than the rest of Europe combined.

This is taking place elsewhere, too. Geologists tell us there is more shale in MENA (Middle East and North Africa) countries than anywhere else in the world.

Saudi Arabia had ignored its natural gas until recently. Now, that kingdom is involved in an energetic pursuit of both freestanding gas and shale.

In addition to the Saudis, substantial shale gas is expected elsewhere in the Middle East – especially Syria, Iraq and Jordan.

I have already talked to a delegation from Morocco on their oil and gas shale opportunities (“Shale Gas Initiative Brings Morocco to My Doorstep,” December 13), and Algeria, Tunisia, and Libya have high prospects, as well.

However, the main global target these days is China.

There, the government has already committed to emphasizing gas as the future for electricity production. The attempt is to wean the country from its reliance on polluting, low-quality coal as fuel for power generation.

The Global Leader in Shale

Wherever you are in the world, the primary advantage in the development of shale gas is its ability to satisfy a larger portion of domestic energy requirements from local or regional production. Natural gas is also a rising source for the industrial and petrochemical applications that are essential for economic development.

The downside, of course, remains the environmental impact and water quality considerations.

Hydraulic fracking is the technology used to break open the rock and release the gas, and it employs large amounts of water. That, coupled with the chemicals used in the process, result in a fear of releasing toxic substances in flowback.

The U.S. is the global leader in shale gas (and oil) technology – both in extraction and in addressing the environmental consequences.

There are more than two dozen producing shale gas basins in the American market, along with several additional huge plays in Canada.

In response to the explosion of international interest in shale gas, the U.S. Department of State (DOS) launched the Global Shale Gas Initiative (GSGI) in April 2010.

The organization seeks to provide expertise and advice to developing countries worldwide on the exploitation of shale gas and its economic, policy, and market ramifications.

One of the reasons for the GSGI is the opportunity it presents American companies to profit from shale gas development elsewhere in the world.

Certainly, producers are interested…

Who’s Positioned to Profit

In addition to those leading the shale gas production list – such as Chesapeake Energy Corp. (NYSE:CHK) – major oil companies have used M&A to move into the sector.

Exxon Mobil Corp. (NYSE:XOM) acquired XTO, and Chevron (NYSE:CVX) absorbed Atlas Resources to target shale gas. XOM has an immediate reason, since it is already involved in several European shale plays.

Others, such as Shell (NYSE:RDS.A), Total (NYSE:TOT), Statoil (NYSE:STO), as well as the Chinese majors CNOOC Ltd. (NYSE:CEO) and Sinopec (NYSE:SHI), are farming into already-producing basins or joint venturing with experienced major producers.

There are certainly opportunities for the investor to make some profit for what the operators are doing. Yet the main advantage may well come from the technical side.

Here, the current leaders in shale gas applications remain the largest oilfield service (OFS) companies: Halliburton Co. (NYSE:HAL), owner of the patent on the primary frac technique, and Schlumberger Ltd. (NYSE:SLB), the worldwide leader in OFS.

The most significant potential for investor interest will be with those companies developing improved drilling techniques, non-chemical fracking processes, and larger-horsepower pumping equipment. Each of these categories becomes more essential as the number of shale gas wells grows – bringing renewed environmental concerns right along with it.

It has been less than a decade since the combination of horizontal drilling and fracking made the exploitation of shale gas profitable. In the interim, an initial stage of technical improvements has reduced the cost of production.

Another stage of improvements is now necessary, both to address the declining pricing of gas in the U.S. market (resulting from the rapidly increasing volume coming from shale development) and the need to make the process safer for the environment.

Currently, a number of small companies are rising to the challenge with advances in equipment, pumping techniques, and water treatment. This is going to be the next great example of the entrepreneurial spirit.

And it will receive a major boost from what is now happening elsewhere in the world.

Source: Kent Moors, Seeking Alpha

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Nov 04

New Natural Gas Deposits Discovered In Germany

By Curve ExxonMobil, Germany, International Oil Corporations, natural gas, Shell No Comments »

International oil corporations have started to explore enormous new natural gas reserves in Germany. As ExxonMobil and Shell confirmed, they are looking for so-called shale gas in North Rhine-Westphalia and Lower-Saxony. “We know that the gas is there,” company circles said: “We just do not yet know whether it can be produced economically.” At present, test drilling is being done. However, the exploration will take at least another two years. In five years at the latest, the first shale gas could be produced commercially in Germany, it was pointed out. [passage omitted]

Only part of the reserves in North Rhine-Westphalia are shale gas; mostly they consist of gas that is incorporated in coal seams. The gas in Lower-Saxony is said to be primarily shale gas. [passage omitted]

Source: BBC Monitoring via COMTEX

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Oct 22

Shale Gas to Radically Transform Global Energy Landscape

By Curve global energy landscape, shale gas No Comments »

New technology raises the prospect of shale gas to replacing other fuel types and radically transforming the global energy landscape, according to a new report from independent business analysts Datamonitor.

In its report, entitled “The shale gas industry outlook”, Datamonitor claims that shale gas will become cheaper than conventional sources due to technological advancements that make it easier to extract.

Shale gas is a natural gas that is retrieved from shale formations and was previously expensive to produce due to its high density. However new horizontal drilling and hydraulic fracturing technologies have reduced the cost.

The shale gas revolution began in America and according to the report, is gaining momentum in other parts of the world, with potentially huge ramifications. Sierra Highcloud, Datamonitor analyst, said: “There has been strong growth in production in the US and this is now starting to affect markets in other regions, where the implications could be massive. In particular, it has the potential to drastically alter China’s energy market.

“The country’s gas use is set to soar, driven by rising demand and government policy, which aims to increase the role of gas as a primary energy source to 10 per cent by 2020. Currently, this would result in a production shortfall. China has large shale reserves so the ability to extract from them will be key.”

According to the report, China is tapping into US expertize to extract from its shale gas reserves and companies such as Total and Shell are already making moves. In Europe, Germany has taken the lead in promoting the transfer of the skills and technology needed to boost shale gas output. Meanwhile India is exploiting its good energy ties with America and is working to catch up with China in terms of knowledge transfer.

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Feb 09

Unconventional gas gaining momentum worldwide

By Trevor J. Murphy shale gas in Europe No Comments »

Developments in the US and Australian unconventional gas sectors have grabbed the headline in recent years, but new regions are about to step into the limelight

Unconventional gas has driven some of the biggest energy news stories in North America and Australia in recent years as production ramps up and companies look to build positions in this long-term growth play. There remain many growth opportunities in these regions and, despite the slowdown driven by the market turmoil over the past 18 months, unconventional gas remains an attractive long-term investment. Meanwhile, outside North America and Australia, momentum is also building and these new regions could create the headlines of the future.

The dramatic rise in shale-gas production in the US, following tight-gas and coal-bed methane (CBM) production growth, has demonstrated the scale of the effect unconventional gas can have on even the very largest gas market. Unconventional gas production in the US Lower 48 has risen from 33% of the total output in 2000 to 59% today, and this is expected to rise to 73% in 2020. North America now has the potential to be essentially self-sufficient in gas over the next decade or more, which not only has significant implications for the US’ LNG-import requirements, but will also have a knock-on affect on other gas markets.

The effect of unconventional gas on the market in eastern Australian has been just as dramatic and Queensland’s prolific coal seams have proved a reliable source of gas even at prices below $3/’000 cubic feet. As a result, long-held plans for pipeline imports from Papua New Guinea have been cancelled and projects to export large volumes of CBM as LNG are moving forward – 10 or more LNG trains are under consideration.

The promise of large resource volumes and long-term growth is an attractive mix. Companies with no, or limited, previous exposure to unconventional gas, such as BG, Petronas and StatoilHydro, have built substantial positions in a relatively short period of time. Additionally, others such as Shell, ConocoPhillips and BP have added to their positions over the last 18 months.

For companies looking to gain a position, the upheaval in financial markets is providing an opportunity, as the independents that have been the engine of unconventional-gas growth seek partners to help fund their plans. As a result, new partnerships are emerging such as StatoilHydro with Chesapeake and Eni with QuickSilver in the US, and Shell with Arrow in Australia.

There remains much to do in North America and eastern Australia, but attention has also turned to the next areas for potential unconventional gas production. Positive long-term gas-market conditions are driving interest, most notably in Europe, India, China and southeast Asia. Companies from the very largest down to new start-ups are hunting for the next Barnett Shale, Pinedale Anticline or San Juan basin. Areas with good potential for tight gas, shale gas and CBM have been identified across these regions, but many questions still remain including:

• Where are the sub-surface conditions right for commercial production?
• How do you gain access to the land, both in terms of licensing and then physical access?
• Can you access suitable low-cost equipment and resources to run an efficient, long-term drilling campaign over a wide area?
• Are the fiscal terms sufficiently attractive to support commercial development?
• Are there pipelines to deliver the gas to market, and can they be accessed?
• What effect will environmental and regulatory restrictions have? and
• Will the gas price sustain development?
Many of these questions are applicable to conventional gas production, but they become even more important for unconventional gas developments where, for example:
• More drill sites are required;
• Continuous drilling is needed to offset well decline rates;
• Land may be held by incumbent companies, or split between many land owners;
• No suitable supply chain may exist;
• Higher costs mean economics are marginal; or
• The additional environmental challenges, such as water management and surface footprint, can be challenging.

Despite the challenges, unconventional gas production will take off in new areas – the preliminary economics look attractive for many of these emerging plays, with rates of return above 10%. However, there remains much uncertainty as little or no pilot testing has been carried out on them and more work is required by operators to test their viability.

Many of the above ground issues are only just being encountered in these new areas, but in some regions they are already stalling developments. In India, for example, initial progress with licensing was rapid, with three CBM licensing rounds having been completed and a fourth on the way. But progress has been slowed by local demands and gaining access to land. By contrast, initial progress in China was very slow as companies entered protracted negotiations with China United Coalbed Methane, although momentum is now building and the government remains extremely supportive through both targeted regulation and fiscal terms.

In Europe, licences are being acquired across the continent and pilot testing is starting to progress. Issues with accessing land are yet to have a large effect as operations are at a small scale. But if developments progress, this will be a significant challenge because of the strong environmental lobby; an innate conservatism of local communities towards new developments; and diverse land ownership. The limited supply chain in Europe is also being tested even at this early stage and new equipment and expertise will need to develop.

While these issues vary on a play-by-play basis, understanding the above ground risks becomes essential for assessing the real opportunity that unconventional gas presents. As a result, companies need a solid understanding of these risks if they are to successfully drive growth.

As a result of the many uncertainties, it is too early to forecast exactly when unconventional gas will take off in these new areas. But unconventional gas is unlikely to have a substantial effect on regional energy markets outside North America and eastern Australia for more than five years. From the middle of the next decade, however, production in China could begin to make an important impact, particularly if strong government support remains in-place.

In Europe, India and southeast Asia, unconventional gas is unlikely to have a significant effect on regional energy markets for the next decade, but local supplies could ramp up over this period. Beyond this, volumes could increase and play an important role in the supply mix. And other areas should not be overlooked: possible plays are being examined, and in some cases progressed, in Latin America, southern and northern Africa, and the Middle East, for example.

In these new areas, important milestones will signal progress. Initially, these include: successful pilot projects with repeatable flow rates; the announcement of the first commercial projects, however small; continued licensing; and a flow of new pilot projects. After the initial phase, companies will need to demonstrate that they can scale-up developments in a play and this means overcoming land access, supply chain and environmental issues on a much larger scale. For this to occur, continued government support will be essential and positive market fundamentals must remain in place.

If these milestones are met across Asia and Europe, then it could be these regions generating the unconventional-gas headlines of the future.

By Rhodri Thomas for Petroleum Economist

SOURCE:
Petroleum Economist: “Unconventional gas gaining momentum worldwide”

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Jan 21

Oil giants BP, Shell and Statoil in Talks to Buy US-based Toreador Resources

By Michaela Davies shale gas in Europe 1 Comment »

Oil giants BP, Shell and Statoil are in talks to buy US-based Toreador Resources, which holds extensive assets in France’s oil shale play, according to reports.

Source: News wires  Thursday, 21 January, 2010, 08:54 GMT

The companies have signed confidentiality agreements with Toreador, which has a market capitalisation of $210 million, and concluded technical due diligence on the company’s oil properties, Reuters quoted a report on the New York Times’ DealBook blog as saying.

Toreador has the right to develop 649,000 acres in the Paris basin, with a further 153,000 acres pending regulatory approval. Toreador believes the basin’s source rock hosts an estimated 65 billion barrels of oil.  New drilling technology has opened up drilling for oil and gas in complex rock formations, including shale, which were previously uncommercial.  In November, Toreador said it was exploring strategic alternatives, including raising capital by equity or debt offerings, and possible partnership in the Paris basin oil shale.

Shell declined comment. BP and Statoil were not available for comment, Reuters said.

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Jan 20

IEA: “Unconventional gas is unquestionably a game-changer”

By Trevor J. Murphy shale gas in Europe 1 Comment »

The recent capitalization on the exploration of shale gas in North America has transformed the global gas-market outlook, says the International Energy Agency.

The rapid development and extraction of the unconventional gas in places like Haynesville and Marcellus in the Unites States have kick-started the ambition by some companies to look to Europe for vast, unexplored shale plays.

“Unconventional gas is unquestionably a game-changer in North America with potentially significant implications for the rest of the world,” said Nobuo Tanaka, Executive Director of the International Energy Agency in a November press release.

The International Energy Agency estimates that unconventional gas resources in Europe, including coal-bed methane, could amount to 35 trillion cubic meters, six times higher than the continent’s conventional gas resources.

Some oil companies have already begun capitalizing on Europe’s un-tapped shale plays. Royal Dutch Shell PLC, for example, is expected to finish drilling its first three wells by the end of March hoping to extract what one spokesman called “enough gas to cover Sweden’s gas needs for at least 10 years.”

Other companies, such as Vancouver-based Realm Energy International, have also announced the will aggressively continue the evaluation and the acquisition of high potential shale deposits throughout Europe (read: Realm Energy, Halliburton Driving Shale Play Development Outside North America).

The Oil & Gas Journal reports that countries currently being evaluated by international oil and gas companies include France, Germany, Austria, Poland, Hungary and the UK.

SOURCES:
International Energy Agency: Press Releases
Oil and Gas India: “Shell begins drilling for shale gas in Sweden”
Oil & Gas Journal

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