Languages: ENG FR ESP PL Home Careers FAQs Contact us Share price At 11:20 PM 60.5p About us About us Close At-a-glance Our strategy Our principles The Board Advisory Committee Business model Acquisitions Briefing note on unconventional exploration and production In focus The Board Operations and assets Operations and assets Close Operations and assets Seismic capabilities Acquisitions Albania France Ireland Morocco Investing in the Sahara Region Poland Romania Spain Operational contact details Licences in Poland In focus Seismic capabilities Expertise Expertise Close Our approach Partners Innovation Meet the experts Energy & environment In focus Meet the experts Investors Investors Close Regulatory news Our investment case Share price information Merger of San Leon and Aurelian Results and reports Annual and interim reports Corporate presentations Publications Significant shareholders AIM Rule 26 checklist Shareholder information Annual General Meeting Extraordinary General Meeting Advisers and Registrar ADR Shareholder FAQs Financial calendar In focus Annual Report Sustainability Sustainability Close Environment policy Board responsibilities Audit Committee Remuneration Committee Nomination Committee Risk and Safety Committee Anti-Corruption and Bribery Policy Risk management Community Shale FAQs Glossary In focus Environment policy Media centre Media centre Close News releases Insights blog Videos Calendar Multimedia Lewino Frac gallery Rawicz-12 flow test gallery Webcasts Subscribe to our news In focus Webcasts Home / About us / Briefing note on unconventional exploration and production Briefing note on unconventional exploration and production Shale is currently considered to be ‘unconventional’ – this may change as shale becomes more mainstream. Quick read ‘Unconventional’ is the term currently used to describe shale exploration and production In North America unconventional is likely to outpace conventional Unconventional involves horizontal drilling, injecting water and fracturing rocks As with conventional there are environmental concerns The industry is regulated to mitigate environmental impacts Europe has great potential for shale What do we mean by unconventional oil and gas compared to conventional? Within a few years, we may see the distinction completely disappear. It seems likely that in North America at least, oil and gas production from unconventional fields will be greater than any volumes from what were previously considered conventional sources. When that happens, how could the dominant method then be considered unconventional? Simply put we can say that current conventional oil and gas are easier to produce in terms of the cost and method of producing it. Another key distinction between the two is that conventional is hard to find but easy to produce, while unconventional is the opposite. Shale rocks comprise the majority of the earth’s rock and some geologists believe that as the production techniques are perfected, natural gas will be found to be globally ubiquitous. There are then two key issues to address: how easy is it to produce gas from the rocks? And are the rocks close to customers? Until the recent shale revolution, it seemed the industry was literally going not only to the ends of the earth to search for hydrocarbon resources, but also plunging the depths of the seas. Is it truly correct in that sense to call ultra-deep drilling discoveries conventional? This century has seen three huge oil and gas discoveries offshore: Brazil oil; East African oil and gas; and the predominantly gassy Eastern Mediterranean fields. These have all been game-changers, yet they have all accessed what were known as conventional reservoirs. Some of the controversy has arisen because conventional resources have a history of being able to be measured more easily than unconventional, predominantly shale, resources. But the reserve to resource ratio even for conventional changes over time. The classic definition of reserves is ‘accessible using present technology’. By its very nature technology improves over time. In the 1970s it was thought that much of the oil and gas reserves would run out by the end of the century. That was certainly the conventional thinking in large discoveries of that era such as in the North Sea and the North Slope of Alaska. These two areas still alive and thriving today. Unconventional oil and gas refers more than anything to unconventional geology. Until recently, oil and gas was found contained in discrete reservoirs trapped between geological strata, for which we had several decades of experience of reservoir estimation to draw upon. Shale gas has widespread resources, but it has taken a combination of two technologies to access them. The first was horizontal drilling, itself a product of conventional drilling, especially offshore. The second breakthrough was also originally used in conventional fields. This was the process of stimulating the rock using various mixes of water pressure and chemicals to open the rocks to let hydrocarbons flow to the surface. These two advances, combined with the introduction of cheap and powerful computing resources into fields such as petro-chemistry and petro-physics, have made both exploration and production far more certain. Interestingly, the new 3D and 4D seismic technologies that brought on shale have had a similar impact on conventional offshore drilling. This particularly significant given that major oil companies are now the largest buyers of super computers after government intelligence agencies and weather forecasting. (Click on image for a larger version) Conventional and unconventional production Conventional is hard to find and easier to produce. It’s closer to the surface and thus drilling costs are low. Historically it was a collection of many shallow wells directly puncturing the reservoir. The costs are lower, but the resource itself is not widely distributed and tends to be far away from the market. Unconventional consists of single pads containing multiple wells. Accessing a large area, hydraulic fracturing releases much more oil and gas and has the benefit, and problem, of being on, or under customer doorsteps. How are assets measured? Conventional assets are measured in terms of the size of the reservoirs. Once the field has been discovered, it’s easy to measure it and produce fairly accurate pictures of how much oil or gas it contains. Conventional resources have been around for over a hundred years and geologists can be confident with the accuracy of the data. Unconventional resource estimation is still open to dispute in some quarters. The resource often appears huge, but the amount of gas and oil they hold is harder to measure. However, it would appear from North American experience that almost all shale plays can produce some oil or gas. It then becomes a question of how easily the rocks can be made permeable – what is often called ‘frackability’. Rocks are heterogeneous yet the shale revolution has resulted in some common properties necessary for shale evaluation. They include geological standards such TOC (total organic content) reservoir pressure, thermal maturity and clay content. Alongside properties of the reservoirs themselves it becomes a matter of measuring physical extent, measured by both area and thickness. Another factor is the depth of the resources. Shale resources tend to be much deeper than conventional oil and gas wells and depth is a key indicator of how costly drilling itself will be. The lack of much history of shale gas extraction gives rise in some quarters to nervousness over the size of the resources. We know that theoretically the resources are huge, but some conventional thinkers remain unconvinced even though the rapid rise of production in North America is dispelling many initial misgivings. What are the technologies? Hydraulic fracturing involves sending high volumes of water underground at high pressure to force open rocks to release gas. Horizontal drilling entails drilling down but then across so that the well bit accesses much more of the rock face. This can make one well far more productive than a single vertical well used in traditional onshore drilling. What are the benefits? Horizontal drilling is likely to be particularly helpful in Europe in the future. Simply put, all the action takes place underground. Using multiple wells fanning out from a central location into thicker shales has benefits in reducing surface footprint. Reducing footprint is not only vital in getting public acceptance of shale gas, but also in reducing costs. What are the environmental impacts? The surface impact of shale production can be mitigated by multi-pad horizontal drilling. While the method uses a large amount of water, it has not consumed more than a quarter of one percent of local water resources in North America. This may be more in arid areas, but these are the very areas where population competing for scarce resources is also low. To put this into context, shale gas and oil is considered viable in terms of water requirement in North Africa, the Middle East and outback Australia. Water has a number of issues: availability; transport to site location; chemical composition; treatment of flowback water which returns from the well; and finally return of the water to the hydrological cycle. However, careful management of the water has proven to be both safe and sustainable. In Europe, stringent EU regulation combined with industry adherence to the International Energy Agency’s Golden Rules of Gas will ensure the growing public confidence necessary so that gas resources can be translated into reserves. What are the prospects in Europe and North Africa? While shale gas is present across the globe its profitability is closely linked to the proximity of resources to markets. Equally there are challenges posed by the existence of sources of oil and gas too close, or indeed under, dense population. This is particularly true in Western Europe. Shale is widespread across the major markets of France, Germany and the UK. This provides excellent opportunities to serve the local markets. Is it still true that a multi-well vertical drilling field in pristine areas such as the Arctic or deserts thousands of miles from end users (which then needs substantial energy to transport the fuels) can be called ‘conventional’? On a strict interpretation, gas from the remote northern ocean locations, transported hundreds of miles to an LNG terminal, where it is frozen, and then transported thousands of miles and then re-gasified, is considered ‘conventional’. Yet gas, literally under our feet, transported only metres away to either a gas grid or directly into a power station is still considered by some as ‘unconventional’. The dynamic nature of the oil and gas industry, combined with changes in public perception, will no doubt continue to redefine what we mean by these terms. 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