Why Global Shale Development Drags
By Trent Jacobs
While shale reserves are found around the world, development has been limited to North America. At the recent SPE Hydraulic Fracturing Technology Conference in The Woodlands, service company executives offered reasons why international development could be years off.
Even in countries where there is an urgent need for more oil and gas—such as India and China—there are obstacles to development ranging from lack of the equipment needed for factory-like development and electrical codes to questions about rock properties and mineral rights. A sample of the barriers to development Australia, China, and India shows why it can take time to get into the shale game.
The country has an established oil and gas industry, but the cost of drilling horizontal wells is two or three times higher than in North America because of a lack of infrastructure and the supplies needed to drill and complete horizontal wells.
Even in Australia’s Cooper Basin, long the heart of the country’s onshore upstream activity, the average cost of shale wells is running between USD 10 and USD 15 million—a figure that needs to be closer to USD 8 million to turn a profit. “There are other examples there of wells costing over USD 20 million and some as high as USD 30 million. So clearly, we are not efficient yet,” Karl Blanchard, vice president of unconventional resources at Halliburton, said during a conference panel session.
The cost of development is also a barrier. The operator who drilled the first shale well in Australia first had to build a 50 mile (80 km) road just to access the drill site, said Jeff Miesenhelder, vice president of unconventional resources at Schlumberger.
Regulatory issues, such as nuances in the country’s electric code that can lead to delays of imports of equipment from North America into Australia for up a year, are also an issue. “If you want to bring a frac unit or a drilling rig into Australia, you basically have to rewire it because the code is completely different. It requires wires to be a certain color,” he said.
The single, largest obstacle to significant shale production in China is the country’s lack of reliable geologic data, Blanchard said. Before more investment makes its way into China, Blanchard said better information is needed about the layers of rock because the success of horizontal drilling and fracturing depends heavily on it. “The industry has concerns about whether the rock is really there, or what size the reserves really are,” he said.
The priority in India should be to improve the process of land acquisition, Blanchard said. The lack of clarity on land rights represents a large risk for international operators looking to begin an expensive exploration program. India surface rights are held separately from the subsurface rights. “Operators today have a difficult time when acquiring surface rights and understanding whether or not they have dealt with the right organization,” he said. “Operators will deal with the land owners, they will get the access, purchase the land, develop their operations on it, and then they find themselves in the quagmire with others who are claiming rights to ownership of that land.”
Trent Jacobs is a Technology Writer for the Journal of Petroleum Technology.