North American Operators Look Abroad
As the US shale boom has shifted the gas side of the global energy landscape, US operators and geologists have looked abroad. A recent IEA survey has highlighted the resource opportunities on every continent, with special interest in Europe and China. Most majors and quite a few independent ‘shale-hardened’ E&Ps have entered the international Shale Search.
Results are mixed. Early returns from the Polish Shale highlight the difficulties of resource extraction from regions with high population density and weak service infrastructure. Poland has only 10% of the water per capita of the US – a vital resource for fracture stimulation (fracking). The supply of drilling rigs in Europe is less than 10% of the US. And the most promising Polish Shales are in the middle of the highest population density in country. Oh, and the early drilling results are weak – initial production from most wells were significantly below the earliest US shale developments in the Barnett Shale. We knew it was deeper and likely to require more like $8 gas, but the European Shale Rush may move even more slowly than expected.
Meanwhile, YPF has disclosed results from their Vaca Muerta (“Dead Cow!”) prospect in Argentina– a near 8 million acre potential resource. The oily shale has characteristics much like the Bakken (North/South Dakota) – only thicker. Recoverable resource could run over 10 billion barrel equivalents – although it will take years to exploit. Yes, Argentina and YPF need more rigs, more services, more capital, and better fiscals, but there is plenty of resource, service providers are starting to line up, and the money will come. Watch this space in 2012.
The easy takeaway is that the US/North American Shale Opportunity is unique – huge resource, generally available water, services, main pipelines, and demand centers are all available and, so far, economic. Yes, there is probably a need for more customized regulation of fracking and other drilling/completion services. However, the bigger opportunity/need is for ways to exploit the resource by substituting domestic natural gas for imported oil and older/more emissions-challenged coal-fired power. Who will lead this change?