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SEE Upstream Bucharest 3.04.2014
Could US Shale Gas Revolution be Repeated in Europe
– a Case Study of Poland
Paweł Poprawa The Energy Studies
Institute, Warsaw
shale / tight oil in USA
• currently – 6,5 % of US oil production • projection for 2016-2020 – 15-20 %
shale gas impact on US economy
• recently shale gas stands for ~ 40 % US gas production, while shale oil stands for 6,5 % US oil production • cumulative annual shale gas / oil investments in US is in a range of ~100 bln USD/year • US limited gas import – export of LNG gas; US become the biggest gas producer in the World
• decrease of gas price in USA in 2008-2009 – big nominal profit for economy and individual consumers
• cheap gas in USA – attracts gas consuming industry; US chemical industry turning back to US
• investment of 1 mln USD/year creates 14 jobs (direct – 4, indirect – 4,5, induced – 5,5); 600+ thousand new jobs
shale gas in Europe – pro vs contra
• breaks the historical division into less developed, unreliable exporters vs developed consumers – different geographic distribution of resources
• challenges existing structure of gas supplies (e.g. Gasprom, Northstream, Southstream, North Africa, Norway)
• competition with other energy producers – nuclear power plants (France), renewable energy (Germany/EU), coal (Poland)
• local communities & green activist, in some countries also politicians, concerns about environment impact
• for countries with high coal & lignite position in energy mix – a realistic alternative allowing for reduction of CO2 emission
• countries dependent on monopolistic gas supplier desire alternative (Central & Eastern Europe)
challenges for shale gas exploration in Europe
• EU strategy, regulatory framework & political acceptance
• technology and know-how transfer from North America
• availability of drilling & seismic service (protected market)
• availability of qualified / certified stuff
• drilling and production cost
• property right structure
• environmental concerns
• geological challenges – differences to N. American basins
• scale of required financial resources
drilling rigs (June 2012) rigs required in Poland in positive scenario: 250-300
Source: Energy Economist
Source: Carl T. Montgomery and Michael B.
Smith, NSI Technologies
availability of drilling, frack & seismic service (protected market)
hydraul. fracturing equipment (December 2012) required frack teams in Poland in positive scenario: 30-50
concessions for shale gas exploration – late 2010
2010 2007
ConocoPhillips, Chevron, Nexen, Total, (ExxonMobil, ENI, Marathon, Talisman); Polish Oil & Gas Company, Orlen, Lotos, etc.
average recent burial depth – US vs Poland bu
rial d
epth
(m)
after: US Energy Information Administration, 2011
drilling cost per well – US vs Poland pr
oduc
tion
wel
l cos
t (M
M P
LN)
after: US Energy Information Administration, 2011
BALTIC BASIN lack of major tectonic deformations, some normal faulting of the Silurian –Precambrian, partly induced during flexure of the lower plate in front of the Caledonian orogen
grey colors: Carboniferous
brown colors: Devonian
blue colors: Silurian
(Krzywiec, 2010, in press)
Precambrian
Cambrian
Ordovician
Silurian
Zechstein
Triassic
Jurassic
LUBLIN BASIN (SE PART) system of thin- and thick-skinned reverse faults/thrusts developed during Late Carboniferous inversion
(Krzywiec, 2009)
grey colors: Carboniferous
brown colors: Devonian
blue colors: Silurian
www.pgi.gov.pl
Państwowy Instytut Geologiczny Państwowy Instytut Badawczy
recent stage of shale gas exploration
19
80
19
85
19
90
19
95
20
00
20
05
20
10
Barnett
Marcellus
Woodford
Fayetteville
Haynesville
Eagle Ford
Exploration Development Mature
East European Craton
USA
POLAND
After: Halliburton (modified)
First concession in Poland First exploration well in Poland
Explor.
time from beginning of exploration to development and mature production: US vs Poland
slow exploration
Administrative procedures: • permit for drilling a well in Poland 9-12 months, in Pennsylvania
up to 45 days Regulatory regime & political support: • Poland – high political support is appreciated, but discussion on
new regulations created uncertainty for the investors • Poland – some of proposed new taxation models unrealistic • UE – lack of political support plus bureaucratic regime Difficult geological results of first exploration wells Currently it is more difficult for independents to gather money for drilling Companies internal issues (e.g. Talisman)
current stage of shale gas exploration in Poland
• shale gas: some 55 wells were drilled; including ~46 vertical ones; 9 lateral wells with multi-fracturing and well test • tight gas: 6 vertical wells 3 fractured • coming 2-3 years some ~100-150 fractured wells expected to be drilled (> 1.5 bln $)
experiences in Poland
21 exploration companies
- financial potential - human potential - technical experience - technology availability
Majors: Chevron, Total, Nexen, ConocoPhillips, (ExxonMobil, MarathonOil, Talisman, ENI)
Polish National Companies: PGNiG, Orlen Upstream, Lotos, Independents: 3Legs Resources, Petrolinvest S.A., Wisent Oil&Gas,
San Leon, Realm Energy, Cuadrilla, Dart Energy, BNK, Emfesz, Basgas
79 exploration companies
Abraxas Petroleum, Alta Mesa Holdings, Anadarko, Apache Copr., Aruba Petroleum, Aurora Resources, Austin Exploration, BHP Biliton, BP, Cabot Oil&Gas, Carrizo Oil&Gas, Chaparral Energy, Chesapeak Energy, Cinco Resources, Clayton
Williams Energy, Comstock Resources, Conoco Phillips, CNOOC, Crimson Exploration, Devon Energy, Eagle Ford Oil&Gas Corp., El Paso, Enduring
Resources, Enerjex Resources, EOG resources, Escondido Resources, Espada Operating, Exxon-XTO, Forest Oil, GAIL, GeoResources, Goodrich Petroleum,
Global Petroleum, Hess Corporation, Hilcorp, Hunt Oil, Jadela Oil, KNOC, Laredo Energy, Lewis Energy Group, Lonestar Resources, Lucas Energy, Magnum Hunter
Resources, Marathon Oil, Marubeni Corporation, Matador Resources, Mitsui, Murphy Oil, Newfield Exploration, Penn Virginia Corp, Peregrine Petroleum,
PetroHawk, PetroQuest, Pioneer Natural Resources, Plains Exploaration&Production, Redemption Oil&Gas, Reliance Industries, Riley
Exploration, Rock Oil Company, Rosetta Resources, San Isidro Development, Sanchez Energy, Sandstone Energy, Saxon Oil Company, Shell, SM Energy, Statoil,
Strand Energy, Strike Energy, Swift Energy, Talisman Energy, Texon Petroleum, Tidal Petrloeum, TXCO Resources, Unit Corporation, U.S. Energy Corp., Weber
Energy, WEJCO E&P, ZaZa Energy
experiences in Eagle Ford
social acceptance in Poland
Early dialog with local communities: • industry • government and local administration together with experts
Environment monitoring projects: • government – publicly available reports • academic institution – publicly available reports • cooperation with US and Canadian public administration • new wells demonstrate safe Support also related to: • HC tax in 60 % for local administration • political context – alternative to Russian gas
could „shale revolution” be repeated in Europe / Poland
alternative
Source: Der Spiegel, January 2009
• need to proof geological potential (numerous drillings; high costs)
• need to reduce production costs (mainly drilling and fracturing); roughly by half
• bureaucratic and regulatory barriers; EU regulations
• need to develop technical service (drilling, fracturing, waist utilization)
• need to free gas market in Poland
• adjust fiscal regime • requires political acceptance • requires social acceptance • need to proof that technology is
safe for environment