Variables, uncertainties still shape world energy outlook

Technological breakthroughs may have increased the world’s potential oil and gas resources significantly, but variables and uncertainties will determine how quickly and to what extent they are developed, participants emphasized during the opening day of the US Energy Information Administration’s annual conference.

Unconventional natural gas production growth will be strongest initially in North America, and have economic, geostrategic, and environmental impacts worldwide, agreed members of a panel examining that subject.

“We’re not going to see the same kind of global market for gas that exists for oil and coal, although there will be pressure on oil indexing as US [LNG] exports grow,” suggested Jason Bordoff, who directs Columbia University’s Center on Global Energy Policy.

“The global LNG market is still based largely on relationships,” added Ira B. Joseph, executive director of PIRA Energy Group. “Oil price indexation will stick around, but the relationship will evolve over time.”

LNG transactions will continue to be primarily contracts instead of spot purchases, a third panelist noted. “There will have to be a substantial spot market overhang for more unconventional projects to move ahead,” said Wolfgang Moehler, IHS CERA associate director for global gas.

“The US position in the world LNG market will not be static,” Joseph noted, adding, “What it is from now to 2016 will be different from what it will be after.”

Driven by technology

But a second panel examining world hydrocarbon resources said technology will continue to be important in determining which unconventional oil and gas resources are developed and when.

Numerous global areas are unconventional hot spots, observed Phani Gadde, a North American gas supply analyst at Wood Mackenzie in Houston. “Drilling hundreds of wells each year creates a lot of operations information,” he said. “The learning curve never really stops.”

The world’s unconventional resources are generally concentrated, with a handful of countries accounting for about two thirds of the total, indicated Vello A. Kuuskraa, president of Advanced Resources International Inc. in Arlington, Va.

“The shale revolution already has moved into Canada, particularly British Columbia, and is beginning to grow in Argentina,” he told conference participants. China’s unconventional resource potential totals 1,115 tcf of gas and 32.2 billion bbl of oil, mostly in clay-rich areas, while Algeria’s is about 707 tcf of gas and 5.7 billion bbl of oil, Kuuskraa said.

Infrastructure, pricing, fuller characterization, and local support also are determining the rate at which unconventional oil and gas resources are being developed, Gadde said. Argentina, Australia (particularly in the Cooper basin), China, and Russia are doing pretty well, he said.

Producers also will need to apply best practices in many parts of their operations, Kuuskraa said. “Tackling methane emissions will be critically important the next few years,” he added.

Contact Nick Snow at nicks@pennwell.com.

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