The ever increasing demand for natural gas across the Middle East as an energy source has, so far, been largely met by supply from conventional reservoirs. Declining production from these conventional fields, the emergence of natural gas as the fuel of choice because of its lower carbon impact on the environment, and growing local demand through infrastructure and industrialization development has resulted in the projected gap between supply and demand in the intermediate future. Tight and unconventional gas with its associated large volumes and long term potential has emerged as the principal hydrocarbon source to fill this gap. This option has gained momentum worldwide because of the unprecedented success demonstrated by North America for the development of this type of resource and transforming the local energy supply from being a potential gas importer.
Direct transplantation of the North American model to different parts of the world is not a straight forward process and may be counterproductive. The differences between the North American model and the rest of the world includes fiscal regime, regulatory framework, availability of oilfield and associated support infrastructure, data accessibility, level of service provision, and capability. Incorporation of expertise and imbedding of workflows developed through North America unconventional gas projects into local projects can be straight forward and could accelerate leanings and facilitate the development of local reservoirs. That is particularly relevant in areas such as drilling, completion, and stimulation. Extensive and early data collection, including dynamic data, on in these projects can potentially impact future operational plans in terms of well spacing, completion types, and hydraulic fracturing techniques.
A more challenging transplantation is the creation of the right fiscal structures that worked so well for the North American model. That is particularly relevant to the Middle East where gas supply is currently dominated by abundant “inexpensive” conventional sources. Effective exploitation will also require reconfiguring the type and level of support provided by service companies to cater for this emerging business. The North America model has also benefited from the large number of operators and a favorable regulatory system, both of which facilitated data availability and sharing thereby enabling successful exploitation of these resources. With few players pursing tight and unconventional gas in the Middle East, data availability and sharing become even more crucial, particularly in early stages of project execution. A similar challenge is faced in fulfilling manpower requirements in these emerging unconventional hubs. The global pursuit of unconventional gas has resulted in an unprecedented demand for manpower in certain disciplines.
The successful exploitation of unconventional gas outside of North America is possible, but will require a different working model. This panel session is convened to discuss learnings from the North American model and possible variation to that model in the context of unconventional gas exploitation in the Middle East.
The world is facing growing demand for hydrocarbon based energy like has never been seen before. Global energy consumption has grown about 45% over the past 20 years, and it is expected to grow another 39% over the next 20 years. Conventional proven gas reserve is expected to sustain the world’s production for another 60 years. Thus, unconventional resources are expected to grow in importance to meet the growing global energy demand.
In North America, the advance of technology and techniques have stimulated the unconventional resources’ exploration, development, and production. Coupled with good fiscal terms and support from host country, coal bed methane (CBM) and shale gas are forecast to dominate 57% of the North American gas market; whereas for the past few years, tight gas production has steadily contributed to more than 25% of the United States' total gas production. Advancement in economical drilling and fracturing technologies and techniques have massively contributed towards the growth of unconventional resources in North America.
Globally outside North America, huge unconventional resources remain untapped. This increases the need for the industry to work together to develop affordable technology and techniques to unlock these potentials. However, cost for these technologies and techniques remain relatively high. Stricter environmental regulations and lower economic scales mean even higher cost for development and production of these resources. The untapped unconventional resources require cheap technology and techniques that can increase productivity and recovery. Drilling, fracturing, and completion remain the key driving factor.
The development of unconventional and shale gas in the region is going to be a challenge when compared to North America. This is primarily because there are much fewer prospective shale basins and less total shale resources. The development of unconventional gas is not only a subsurface resource finding and exploiting challenge, but one that represents complexity in every aspect of the resource contracting, commercializing, extraction, and sale chain. On one hand, such gas development represents a commercial challenge between the host government, the local market gas users, and the development cost. On the other hand, the extraction of this gas is usually associated with large drilling, hydraulic fracturing, and other well related services beyond the capacity of many existing service bases in the region. Not to mention, the large capital funding required and the immensely intensive human resources for the service sector in particular.
Shale gas development proved a success in North America and we can most likely apply it to Oman and the region at large. Many factors aided shale gas success in the United States. Shale and unconventional gas started by necessity dictated by concerns of shortages. Therefore, there was increased support to research and development of unconventional resources for several years prior to commercialization. This was hosted by existing players and fully supported by research centres, academia, and government. After the resource was successfully found, a competitive market was created supported by open access to pipelines and abundance of gas processing infrastructure with large capacity of gas evacuation via national grid. On commercial, a critical success factor was the increasing gas price trends driven by supply shortage and increasing cost of developing conventional gas resources, thus unconventional started competing. Moreover, easy access to capital to fund this gas development made the investment easier to implement. On technical, gain of technical expertise was readily available. Furthermore, advances and technology were widely spread; in particular, in the area of hydraulic fracturing and horizontal drilling. On services, availability of rigs, hydraulic fracturing, and other well related activities.