International #Shale #Energy Development: Challenges & Opportunity

International Shale Development Report

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Composed by Bo Ollison (https://hbwresources.com/bios/bo-ollison-senior-policy-director/)

Below is a summary of key news and events occurring around the world impacting the use of hydraulic fracturing for extraction of unconventional oil and gas resources from shale formations.  While shale development in the United States has moved forward rapidly due to private land and mineral ownership, stable regulatory policies, access to necessary fluids, and the existence and access to transportation infrastructure; other nation’s are attempting to unlock their own shale resources with mixed results.  While not comprehensive, we hope this summary provides some insight into the event shaping these extraction activities and what they could mean for global energy development.  If you have any additional questions, please contact us at any time: https://hbwresources.com/bios/bo-ollison-senior-policy-director/.

EU

European Union lawmakers voted narrowly to force energy companies to carry out in-depth environmental audits before they deploy a technique known as fracking to recover natural gas from shale rock. The rules were narrowly approved by the European Parliament, which is meeting this week in Strasbourg, France, and still must undergo another round of voting in the Parliament once an agreement on final language is reached with European Union governments. Shale gas projects that do not use fracking would not be covered by the rules, which update environmental legislation in Europe. Members cast 332 votes in favor of giving Andrea Zanoni, an Italian member of the Parliament from the Alliance of Liberals and Democrats, a mandate to negotiate a final deal with European Union governments over the final text of the fracking measure. There were 311 votes against, and 14 abstentions. The rules would update legislation that requires environmental impact assessments only for natural gas projects that extract at least 500,000 cubic meters each day. Many shale projects yield less than that amount and some lawmakers wanted to tighten the rules. For more information, please contact us.

Opening up to shale oil and natural gas in Europe could ensure long-term energy security for the region, an executive at French energy company GDF Suez said. New drilling technologies for shale have led to major increases in U.S. oil and natural gas production. GDF Chief Executive Officer Gerard Mestrallet told delegates at the World Energy Congress in South Korea the shale “revolution” has changed the landscape of energy markets. Europe, meanwhile, is looking for ways to break Russia’s grip on the regional energy sector. Europe gets about a quarter of its natural gas from Russia. Mestrallet lamented European governments were closing gas-fired power plants while at the same time expressing reservations about shale.

Angola

Angola, Africa’s largest oil producer after Nigeria, is imposing a consumption tax on petroleum companies that will raise some costs by as much as 10 percent, according to government documents. The law, which comes into effect with its publication, requires companies to follow a tax schedule that adds five percent to most services and supplies and double that for equipment rentals, a presidential decree showed. Angola set up a special tax reform branch in 2010 to work with government ministries on increasing revenue and closing loopholes in a bid to simplify taxation. The southwest African country, a member of the Organization of Petroleum Exporting Countries, pumped about 1.74 million barrels a day in September from offshore fields, according to data compiled by Bloomberg.

Canada

Korea Gas Corp (KOGAS) is considering selling 5 to 10 percent of its stake in the LNG Canada project, in which it currently holds 20 percent, the KOGAS chief executive said at the World Energy Congress. LNG Canada is a joint venture involving Shell Canada Ltd, KOGAS, Mitsubishi Corp and PetroChina Co Ltd that is to build and operate a liquefied natural gas (LNG) export terminal in Kitimat, British Columbia, according to the LNG Canada web site.

China

Recon Technology, an oilfield service company provider operating primarily in China, has announced the successful deployment of a new automation product for extraction of shale using a highly specialized supervisory control and data acquisition system (SCADA). This comes on the heels of the introduction of Baker-Hughes fracturing technology to China Petroleum and Chemical Corporation’s Zhongyuan Oilfield. Based on the unique characteristics of various shale gas strata, the SCADA system was developed by Recon to monitor and control the operation of on-site equipment to optimize automation through the use of an intelligent production process that is expected to provide a powerful new tool for the delivery of a safe and efficient method of a shale based gas field production.

Shale gas will come to play a more important role in China’s energy mix in the long term, said IHS Cambridge Energy Research Associates Chairman Daniel Yergin at a seminar on energy boom in North America. “China has great potential for shale gas but it will take perhaps five to 10 years to develop, due to the lack of infrastructure and logistic capabilities,” Yergin told Xinhua. He added that Chinese energy companies among others are learning the necessary technologies from their American counterparts to unlock the unconventional energy including shale oil and gas. For more information, please contact us.

France

France’s constitutional council upheld a ban on the energy extraction process known as fracking, two days after the European Parliament voted to require full environmental reports from companies that want to establish hydraulic fracturing sites. French President Francois Hollande had promised to maintain the ban imposed by his predecessor in 2011, even though France had been named among the most promising European countries for shale gas extraction. The French, who rely largely on nuclear energy, fear the environmental costs of hydraulic fracturing are too steep.

Japan

Japan’s Tokyo Gas Co. has revealed it is moving the focus of its upstream gas investments to North America, driven from other producing countries such as Australia by rising costs. Japan is the world’s largest consumer of liquefied natural gas and Tokyo Gas’ latest move follows a growing trend among Japanese companies over the past few years of buying into North American shale gas projects to secure future exports of the deep-chilled fuel. Tokyo Gas has already become a buyer of gas from the Cove Point project on the east coast of the US and in March this year made its first direct investment in US shale, agreeing to buy a 25% stake in a Texan venture from Quicksilver Resources Inc. For more information, please contact HBW Resources.

Lithuania

Lithuania should revise laws on shale-gas works that led Chevron Corp. to abandon its bid for exploration rights, Prime Minister Algirdas Butkevicius said. New environmental approval procedures and plans to raise taxes on shale hydrocarbons were behind the U.S. energy company’s decision to withdraw its lone bid in a tender for exploration rights, Butkevicius said. “It’s worth a fresh look at those laws with an eye to preparing and eventually announcing a new tender,” the prime minister said on Laisvoji Banga radio in Vilnius, the Lithuanian capital. “I can’t say how long that might take.” The Baltic nation wants to develop shale resources as an alternative to energy imports from Russia. Some local communities oppose the technology as environmentally unsafe. The government is negotiating with and suing Russia’s Gazprom OAO, the country’s only natural-gas supplier, seeking to reduce what it calls “unfair” prices.

Mexico

As the Mexican Congress debates reforming its constitution to allow more foreign participation in Mexico’s oil and gas development, companies are eagerly anticipating new business opportunities to emerge south of the border. Mexico is sitting on huge untapped potential in the Gulf of Mexico and on its portion of the Eagle Ford Shale, with oil and gas resources left untouched there because the state-owned energy company lacks the technology and know-how to get at them. But in a speech hosted by Rice University’s Baker Institute, Eduardo Pérez Motta, former chairman of the Mexican Federal Competition Commission, reminded U.S. energy companies that a change to the Mexican Constitution is just the first step toward a return of U.S. and foreign participation in oil and gas exploration and production there. Companies would be wise to put off any investment decisions until the new rules are spelled out and adopted by the government, he advised. But he also said companies should be prepared to move quickly once the secondary law is in place, arguing that it will be “much better to be first.”

Norway

Norway’s gas output is expected to rise in 2014 as its biggest gas field, Troll, is due to be back at full production from next October following a near two-year outage, the draft national budget showed. Gas output from Western Europe’s main supplier is expected to rise to 110 billion cubic meters (bcm) in 2014 from 107 bcm forecast in 2013, the document presented to parliament said.

Poland

The Ministry of Economy and Ministry of Environment want to implement new regulations imposing fines on companies deemed to be carrying out their shale gas extraction projects too slowly. Companies which hold shale gas licenses have slowed down their work considerably in recent months, doing only the bare minimum which license agreements require them to. Meanwhile, shale gas companies are reluctant to invest in exploration in Poland due to the lack of necessary legislation. Without sufficient regulation, it is unclear whether shale gas extraction will be profitable at all. For more information, please contact us.

Romania

The biggest Romanian producer of natural gas, state-owned Romgaz, plans to offer 15 percent of its shares for sale in a stock market debut this year, the company said. The initial public offering (IPO) is part of a wider privatisation plan agreed between Romania and the International Monetary Fund, which has led aid deals for the country since 2009. In 2012, Romgaz produced 5.7 billion cubic metres of natural gas and is also the largest underground gas storage operator.

Saudi Arabia

Saudi Arabia is pushing to boost its oil production capacity by 1.75 million barrels per day by 2017 and is fast-tracking shale gas exploration, analysts say. The kingdom is recalibrating its energy industry to meet the challenge of the United States’ unprecedented production surge from its vast shale oil holdings that threaten Saudi Arabia’s role as the world’s leading oil producer. Saudi Arabia’s unlikely to produce much shale gas or oil this decade, in large part because of a shortage of water needed for the process of hydraulic fracturing, or fracking, to access the hydrocarbons embedded in rock formations. But the original plan for the state-owned oil monopoly, Aramco, to start exploration in 2020 has been rushed forward seven years. Unconventional gas reserves are almost completely untapped in the Middle East. But in March, Oil Minister Ali Naimi estimated Saudi Arabia has 600 trillion cubic feet of shale gas, more than double the kingdom’s proven conventional reserves. For more information, please contact HBW Resources.

South Africa

South Africa’s cabinet proposed new regulations to govern exploration for shale gas, an important step in opening up an industry that could provide new energy supplies for Africa’s largest economy. The draft regulations provide mechanisms for the assessment of the potential environmental impact of any proposed activities, for the protection of fresh water resources, and for the co-existence of shale gas exploitation and the Square Kilometer Array (SKA) project. South Africa last year lifted a moratorium on shale gas exploration in its Karoo region, where fracking might tap what is believed to be some of the world’s biggest reserves of the energy source. “Not only does the potential of shale gas exploration and exploitation provide an opportunity for us to begin production of our own fuel, but it also marks the beginning of the reindustrialization of the South African economy,” Mineral Resources Minister Susan Shabangu said in a statement. “By embarking on this process presented by hydraulic fracturing for the production of shale gas, we bring the country a step closer to the achievement of our objectives,” she said. Developing just a 10th of South Africa’s estimated resources could boost the economy by 200 billion rand ($19.56 billion) a year and create 700,000 jobs, a study, commissioned by Shell and carried out by research firm Econometrix, said last year. The proposed regulations have been published in South Africa’s government gazette and the public has 30 days in which to comment on them. The technical regulations provide for the following:

  1. Assessment of the potential impact of the proposed activities on the environment;
  2. Protection of fresh water resources;
  3. The protection of biodiversity, palaeontology and the broader environmental impact in line with the objectives of outcome 10 of Government;
  4. Mechanisms for site-specific buffer zone determination for the co-existence of shale gas exploitation and the Square Kilometer Array (SKA) project.

The technical regulations are applicable to both onshore and offshore exploration and production operations. They further address crucial elements of the hydraulic fracturing process under the following chapters:

Site assessment, selection and preparation: this relates to site selection and preparation, taking into consideration resources that must be availed for hydraulic operations and the resources in respect of which necessary protection must be afforded such as the provision for the development of mechanisms for coexistence with the SKA observatory.

Well design and construction: this relates to well design in terms of well casing standards to ensure non-contamination of natural environmental and water resources.

Operations and management: makes provision for the management of the hydraulic fracturing process, including the disclosure of fracture fluids to be utilised and the testing of the structures to ensure they can sustain the pressures to be imposed.

Well suspension and abandonment: this chapter addresses issues related to the closure and rehabilitation of the operation. For more information, please contact us.

Turkey

The Turkish branch of Royal Dutch Shell and the Turkish Petroleum Corporation (TPAO) are set to drill the first shale exploration wells in Turkey. The wells will be drilled in the eastern province of Diyarbakir later this month, according to officials from the Ministry of Energy. Shell will reportedly be in charge of operations at the wells, which will be 3,000 metres deep. Shell will initially drill two wells and, if shale gas is found, the company will open more than 20 wells in the region. It is also hoped that petroleum will be found during the exploration.

United Kingdom

Greenpeace has launched a legal challenge to halt fracking in England, claiming drilling under people’s homes without permission is unlawful. “Under English law, if you own land, your rights extend to all the ground beneath it. That means if someone drills under your home without permission it is trespass,” said Greenpeace senior campaigner Anna Jones. The action is based on a test case from three years ago when former Harrod’s owner Mohammed Al Fayed successfully argued at the High Court that a company drilling for oil under his Surrey estate had trespassed. However, the government last month released a consultation proposing to amend the law to allow drilling under homes even when companies do not have residents’ permission. Under current proposals, communities will be offered payments of £100,000 per drill site and one per cent of revenues from production, which could amount to between £5m and £10m per well over 25 years. The move is the latest effort by campaigners to curtail the development of the UK’s nascent fracking industry, which critics argue uses huge amounts of energy and water, causes earth tremors, and can pollute local water sources with chemicals – claims the industry rejects arguing the technique has been used safely in the UK for 25 years. Green groups are so concerned that a boom in shale gas development will lock the UK into fossil fuel infrastructure and undermine investment in renewables. For more information, please contact HBW Resources.

The U.K. government is keen to explore shale gas as an alternative domestic energy supply, and the country’s Select Committee on Economic Affairs held its first session hearing evidence from experts on shale gas and the possible impact of its extraction. The questions being explored during the hearing included: How much scope is there for shale gas and oil to be used in the UK? Over what timeframe? How will the costs, including those on the environment, of accessing the UK’s shale gas and oil compare to those of other energy sources? What is the potential impact of shale gas and oil on the local economies in areas where development is possible? What effect will the use of shale gas and oil have on carbon emissions compared to other combinations of energy sources? Will shale gas and oil increase UK energy security? What lessons can be learned from the US experience of shale gas and oil? What impact will shale gas and oil have on household energy bills? Prior to the hearing, the Committee released, “The Economic Impact on UK Energy Policy of Shale Gas and Oil.

Additional Information

For additional information, please contact Bo Ollison with HBW Resources.  His contact information is below.

Bo Ollison
HBW Resources
2211 Norfolk Street, #410
Houston, TX 77098
Tel: 713-337-8810
E-mail: bollison@hbwresources.com
Web: http://www.hbwresources.com
Twitter: @BoOllison

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