Rig supply, lack of gas infrastructure and environmental concerns may hinder shale development
By Linda Hsieh, managing editor
Shale gas has revolutionized the North American natural gas landscape over the past few years. Across the pond, with the European Commission projecting that Europe will have to import more than 90% of its oil and more than 80% of its gas by 2030, many are understandably itching to stage a shale gas revolution of their own. But is the timing right? Are all the players ready? What are the differentiators between the two regions that could mean success for one and failure for the other?
The challenges are many. For one, many new drilling rigs will either have to be built or brought into Europe to drill the types and numbers of wells that commercial-scale shale gas production would dictate. In mid-June, Wieslaw Prugar, president of Poland-based Orlen Upstream, took to the podium at the IADC World Drilling 2011 in Copenhagen and appealed to drilling contractors to consider taking more drilling rigs into Europe. He described the rig situation in Europe as “a bottleneck.”
At the same event, Michael Schuetz from the Directorate-General for Energy noted that there is still a lack of gas infrastructure interconnecting the European Union member states, while Halliburton’s Mark Van Domelen pointed out that environmental and water supply/disposal challenges could impact the successful application of horizontal fracturing completion methods that have been key to the success of shale plays in North America.
Gas in the EU energy mix
Currently, natural gas fuels approximately a fourth of Europe’s energy needs and produces a fourth of its electricity. According to Mr Schuetz, the European Commission has completed initial assessments of unconventional gas and believes that it could strengthen European hydrocarbon production and contribute to its security of supply. “But my commissioner was quite clear in the European Parliament a few weeks ago that he expected also in the future the EU will still have to import most of its gas,” he said.
“That doesn’t mean that making the best use of our shale gas potential cannot contribute to secure supply; every cubic meter of gas which is produced domesti cally counts. Also, the shear potential of domestic energy source can influence the behavior of exporting countries,” he added.
Mr Schuetz believes that the most important factor in making unconventional gas a success in Europe is improving the internal gas market: To find customers, companies will need access to the grid. “We are often asked what is the commission doing on shale gas, and my answer is we are ensuring companies who produce shale gas, or who probably will produce shale gas, can market natural gas,” he said. Regulations from the commission’s Third Internal Market Package providing non-discriminatory access to networks and allowing fair competition between suppliers took direct effect on 3 March 2011.
However, there’s also no value in having access to the grid if there is no grid, and right now there is still a lack of interconnectors between European member states. One thing the European Commission has done is identify European infrastructure priorities, including the North South Gas & Oil Interconnections in Central & Southeast Europe, “where unconventional gas has the most potential,” Mr Schuetz said.
Rigs, rigs, rigs
In Poland, one of the hot spots in European shale gas exploration today, Orlen Upstream’s Mr Prugar is eager to see more drilling contractors and rigs arrive in his country. He estimates that there are only a little more than 100 land drilling rigs in Europe right now, approximately 50% of them located in Poland, Romania, Germany and Ukraine. However, only a portion of them are suitable for shale gas drilling. For example, there are 15 land rigs currently available in Poland, he said, but only five of them can be used to drill deep shale gas wells.
Without access to a competitive market of capable drilling units, oil companies won’t be able to kick-start commercial-scale drilling programs, he said.
“It is really a bottleneck. … Most of the rigs which are available in Europe are not suited properly to the task they will have eventually on the shale, or let’s say unconventional exploration. It may not be a problem today, but I see this problem already contracting the rigs as a problem of tomorrow,” he said.
Poland is certainly one of the leading spots for shale-gas development in Europe at the moment. In April, a report by the US Energy Information Administration estimated that the country has 5.3 trillion cubic meters (187 trillion cubic ft) of shale gas reserves. “It’s really scary from my perspective,” Mr Prugar said. His company, which is a subsidiary of PKN Orlen, holds six concessions in the Lublin basin; majors such as ExxonMobil, Chevron, Eni and ConocoPhillips have also been drawn by the possibilities in that area and have farmed-in to concessions.
“This industry in Poland is 160 years old, and we’ve never thought more than 140 billion cubic meters of recoverable reserves, and now we’re talking 5.3 trillion,” he said. “Of course, it’s theory. Some plays will succeed; some will probably fail. But still, even if this play works on 10%, 20%, the numbers are huge, and the numbers will require a significant amount of effort to make them commercial, including of course the service companies to help the operators.”
Mr Prugar estimates that approximately 20 to 25 rigs may be required in the near term in Poland for shale-gas drilling. “Beyond 2020, if some of the plays will prove, we may think about additional maybe 50 rigs.”
Despite all this potential, he says, he still doesn’t see any serious interest from drilling contractors in investing in this market. He understands they don’t want to commit to a market that doesn’t exist, “but on the other hand, when I talk to them that we might maybe figure out how to do it together, nobody really takes that message seriously and nobody wants to analyze the potential of the market,” Mr Prugar said.
At IADC World Drilling, he urged the audience of drilling contractors to step up and create a more competitive rig environment in Europe so that operators can really investigate the potential of shale and unconventional gas there. “We would like to invite you to come and help us unlock the resource potential from the shale,” he said.
This request was echoed by the European Commission’s Mr Schuetz, who noted the importance of innovative companies willing to take risks. “In the case of commercial-scale shale gas production, if there is economically viable potential, many new wells will be needed. Many new rigs will be needed, and they will probably not come from the US,” Mr Schuetz said. “They are busy there drilling for oil and will probably remain drilling for oil, so we need to build many more rigs. Also, these rigs should be appropriate for European conditions. Technologies will most likely have to be adopted … and that’s your turf.”
Most shale plays in the US today are being completed with multiple fracturing treatments performed in horizontal wells, and the trend is toward increasing the length of the laterals and fracturing a larger number of zones in order to maximize production and minimize cost, according to Mr Van Domelen, senior technical advisor for Production Enhancement for Halliburton.
The most common completion techniques he sees today are:
• Plug and perf technique using drillable bridge plugs for isolation;
• Mechanical, ball drop or remote actuated sliding sleeve completions using open-hole packers in uncemented applications or cemented into place; and
• Coiled-tubing assisted fracturing using hydrajet perforating and sand plugs for zone isolation.
Although these techniques have proven successful in North America, transporting them across the Atlantic into the European market may not be a straightforward process.
The problem is, two of those three methods – plug and perf and sliding sleeves – generally require very high pump rates and significant amounts of fracturing horsepower on location. “However, nearly 75% of the service industry’s global pressure-pumping equipment currently resides in North America,” Mr Van Domelen said.
“The impact this has on Europe is that, as the shale plays progress from exploration to development projects with multi-frac horizontal wells, equipment availability could become more of an issue.”
One way to address this might be through the wider adoption of the third technique – coiled-tubing assisted fracturing. This method facilitates stimulating multiple shale intervals with less than half the hydraulic horsepower requirements and a significantly reduced footprint compared with other currently popular completion methods, according to Mr Van Domelen.
Another related technology uses combined strings of jointed pipe and coiled tubing to fracture-stimulate shale targets in long extended-reach laterals. It combines the benefits of a hydraulic workover (HWO) unit’s increased pipe-handling capacity with those of coiled-tubing operations, such as pipe movement without breaking connections, movement while pumping and reverse circulation.
“This technology has significant potential because coiled tubing and HWO units are available in Europe,” he said.
Not unlike the US, there are also strong environmental concerns in some European countries regarding hydraulic fracturing and water supply and disposal. In fact, the European Commission’s Mr Schuetz said that from a regulator’s perspective, “we need credible answers for environmental concerns.”
Mr Schuetz also advised the industry to take extreme caution in operations if they don’t want to face additional regulations; just one major incident of groundwater contamination could trigger many new rules. “Because then the force would come upon the politicians and the regulators to do something. So in this sense it is up to you to ensure that you will not be hindered by new regulations,” he said.
Industry certainly is moving on multiple fronts to ensure the impact of its fracturing operations. The issue of hydraulic fracturing safety and whether it really puts groundwater at risk is one that industry has repeatedly defended (see May/June 2011 issue of Drilling Contractor).
To address water management issues, Mr Van Domelen cited new technologies such as water-processing units that use electro-coagulation to “clean” produced water from a well so it can be reused on subsequent fracturing treatments.
Another new technology uses ultraviolet light to kill bacteria in fracturing waters. “The UV technology is used in line with the fracturing equipment during the job to kill bacteria in the waters, thus eliminating the need for chemical biocides to be added to the water,” he said.
CobraMax H, PowerReach and Delta Stim Sleeve are registered trademarks of Halliburton.