Hard-to-Reach Gas Might Be the Key to a Secure Supply
Energy companies operating in Europe are turning to more unorthodox sources of natural gas to get around maturing gas fields and the European Union's worries about its dependence on Russian fuel.
Unconventional gas, as it is known, is trapped in different types of rock formations -- much of it in shale -- and can be freed through drilling horizontally, fracturing the rocks or injecting water into spaces.
While unconventional sources usually have a longer lifespan than normal gas reservoirs, getting at the gas inside them is more expensive.
In recent years Europe has made up for its maturing natural gas fields by tapping pipelines from Russia and Norway, and is also now looking to the Middle East and North Africa. But a series of spats between Russia and Ukraine that curtailed gas flow to Europe has reinvigorated the search for more secure sources of the fuel.
"All the European utilities are interested in indigenous gas supplies," said Christopher Wheaton, manager of Allianz RCM Energy Fund. "With technology, the application of cash, brute force and the best ingenuity, we've the potential to unlock a previously unusable resource."
Recent technological advances have made it more cost-effective to get at the gas, so much so that in the U.S., production of unconventional gases in 2008 helped drive the highest-ever annual increase in gas output. It rose 7.5% on the year, 10 times the 10-year average growth rate, according to BP PLC's 2009 statistical review.
Exxon Mobil Corp. is now exporting expertise and technology it developed in North America to gas markets in Europe. In Germany, for example, drilling and testing activity on licenses covering 1.3 million acres of the Lower Saxony Basin started in 2008.
The company also has a joint exploration program with MOL Hungarian Oil & Gas PLC in the Mako Trough in southeast Hungary. It will evaluate its findings for two to three years before deciding whether production would be commercially viable, the company said.
Meanwhile, the U.K.'s biggest gas supplier, Centrica PLC is moving beyond its traditional emphasis on searching for gas under the sea by looking to former mines to tap coal-bed methane.
It plans to drill two exploration wells in 2010, rising to eight by 2014. It has three onshore U.K. licenses in South Wales. Centrica cautions there is still a long lead period before coal bed methane, or CBM, can be produced on any commercial scale.
"In some areas CBM volumes may be significant enough to export to the national transmission system, or we could just see small-scale power-generation facilities constructed to supply electricity to local communities," company spokesman Rhys Jones said.
Smaller companies are in the hunt, too, and are, in many cases, a few steps ahead.
Island Gas Resources PLC, or IGas, in June started commercial sales of electricity generated from CBM to the national grid, a first in the U.K.
The volume of unconventional gas isn't yet significant on a U.K.-wide scale, supplying enough electricity for only 1,200 homes, but the potential is there, analysts say. Some forecasts suggest unconventional gas could make up 10% of U.K. supplies by 2020.
A recent report by energy consultancy Wood Mackenzie said production of CBM in the U.K. is commercially feasible at the current gas price as well as under longer-term projections. The report estimated there could be as much as four trillion cubic feet of gas available in the Cheshire Basin, at the heart of the U.K. gas market.
Another independent, 3Legs Resources from the Isle of Man, has licenses covering more than a million acres in the Baltic Basin region of Poland, where it is targeting shale gas. Company Director Kamlesh Parmar said that 3Legs has started field work to obtain seismic data in the region and plans to drill its first exploration well in early 2010.
Despite uncertainty over the scope of European resources, Wood Mackenzie's manager of unconventional gas research, Rhodri Thomas, said "there could be a material impact on European markets in 10 years plus if unconventional gases do take off."
Unconventional gas, as it is known, is trapped in different types of rock formations -- much of it in shale -- and can be freed through drilling horizontally, fracturing the rocks or injecting water into spaces.
While unconventional sources usually have a longer lifespan than normal gas reservoirs, getting at the gas inside them is more expensive.
In recent years Europe has made up for its maturing natural gas fields by tapping pipelines from Russia and Norway, and is also now looking to the Middle East and North Africa. But a series of spats between Russia and Ukraine that curtailed gas flow to Europe has reinvigorated the search for more secure sources of the fuel.
"All the European utilities are interested in indigenous gas supplies," said Christopher Wheaton, manager of Allianz RCM Energy Fund. "With technology, the application of cash, brute force and the best ingenuity, we've the potential to unlock a previously unusable resource."
Recent technological advances have made it more cost-effective to get at the gas, so much so that in the U.S., production of unconventional gases in 2008 helped drive the highest-ever annual increase in gas output. It rose 7.5% on the year, 10 times the 10-year average growth rate, according to BP PLC's 2009 statistical review.
Exxon Mobil Corp. is now exporting expertise and technology it developed in North America to gas markets in Europe. In Germany, for example, drilling and testing activity on licenses covering 1.3 million acres of the Lower Saxony Basin started in 2008.
The company also has a joint exploration program with MOL Hungarian Oil & Gas PLC in the Mako Trough in southeast Hungary. It will evaluate its findings for two to three years before deciding whether production would be commercially viable, the company said.
Meanwhile, the U.K.'s biggest gas supplier, Centrica PLC is moving beyond its traditional emphasis on searching for gas under the sea by looking to former mines to tap coal-bed methane.
It plans to drill two exploration wells in 2010, rising to eight by 2014. It has three onshore U.K. licenses in South Wales. Centrica cautions there is still a long lead period before coal bed methane, or CBM, can be produced on any commercial scale.
"In some areas CBM volumes may be significant enough to export to the national transmission system, or we could just see small-scale power-generation facilities constructed to supply electricity to local communities," company spokesman Rhys Jones said.
Smaller companies are in the hunt, too, and are, in many cases, a few steps ahead.
Island Gas Resources PLC, or IGas, in June started commercial sales of electricity generated from CBM to the national grid, a first in the U.K.
The volume of unconventional gas isn't yet significant on a U.K.-wide scale, supplying enough electricity for only 1,200 homes, but the potential is there, analysts say. Some forecasts suggest unconventional gas could make up 10% of U.K. supplies by 2020.
A recent report by energy consultancy Wood Mackenzie said production of CBM in the U.K. is commercially feasible at the current gas price as well as under longer-term projections. The report estimated there could be as much as four trillion cubic feet of gas available in the Cheshire Basin, at the heart of the U.K. gas market.
Another independent, 3Legs Resources from the Isle of Man, has licenses covering more than a million acres in the Baltic Basin region of Poland, where it is targeting shale gas. Company Director Kamlesh Parmar said that 3Legs has started field work to obtain seismic data in the region and plans to drill its first exploration well in early 2010.
Despite uncertainty over the scope of European resources, Wood Mackenzie's manager of unconventional gas research, Rhodri Thomas, said "there could be a material impact on European markets in 10 years plus if unconventional gases do take off."
Source: The Wall Street Journal
No comments:
Post a Comment