SPE: Industry cites unconventional resources potential

Oct. 6, 2008
The estimated vast unconventional resources hold much promise for substantially adding to the world’s energy needs, but developing these resources entails overcoming many restraints, attendees were told Sept. 22 during the opening session of the Society of Petroleum Engineers Annual Conference & Exhibition in Denver.

The estimated vast unconventional resources hold much promise for substantially adding to the world’s energy needs, but developing these resources entails overcoming many restraints, attendees were told Sept. 22 during the opening session of the Society of Petroleum Engineers Annual Conference & Exhibition in Denver.

The speakers expected production from these resources to grow but each listed some practical barriers and limitations that may hinder development such as rising infrastructure costs and limited human capabilities.

Demand forecasts are that the world will need 50% more energy in the next 25 years, creating a need to continue developing unconventional resources from tight gas, shale gas, coalbed methane, Canadian oil sands, and oil shale, as discussed in the session.

Oil price

Marshall Adkins, director of energy research and managing director, equity research, Raymond James & Associates, emphasized the need to have sufficiently high oil prices to develop unconventional resources economically.

“At today’s prices development of these resources makes sense,” he said.

Recent high oil prices have squeezed oil demand out of system but in the future, demand will continue increasing because of energy needs in such countries as China and India, Adkins said. He does see oil demand continuing to fall in the economically developed countries. In the US, he expects a continued minus 2% year-on-year demand drop.

Adkins noted that the world does not have an oil bubble because of the limited potential to increase production rates, especially in non-Organization of Petroleum Exporting Countries countries. He added that more rigs are drilling but production growth is not taking place. He expects an average $130/bbl oil price on the New York Mercantile Exchange in 2009.

Tight gas

Charles B. Stanley, executive vice-president and chief operating officer, Questar Corp., noted that tight gas development entails much more intense investment and activity than conventional gas.

Stanley said conventional gas reservoirs had a 70-80% recovery factor, with a few wells and limited infrastructure. In contrast, unconventional gas development requires many wells, he said. The wells decline by 60-70% during the first year and recover about one half of their recoverable gas in 5-6 years, with the remaining gas produced in the next 6-40 years, he added.

In the US, about one half of its produced gas is from tight gas, shales, and coal beds, and by 2020 this will increase to 60-70%, according to Stanley.

He noted that the US currently has an 8% year-to-year ramp-up in unconventional gas production.

Innovations in drilling, completions, and reservoir characterization have allowed development of these resources, Stanley said. Some innovations, he noted, were in rig design, bit design, new drilling fluids, directional drilling, fracing, coring, and microseismic.

Stanley said US permitting problems persist because local and state agencies are not staffed to handle the large number of wells needed to recover gas from unconventional resources.

Oil shale

Glen Vawter, executive director, National Oil Shale Association, said current oil shale research and development concerns in situ retorting. In the 1980s, before the US oil shale industry went bust, projects primarily involved mining and surface retorting. He noted that four of the main companies doing work in Colorado oil shales are Royal Dutch Shell PLC, ExxonMobil Corp., Chevron Corp., and American Shale Oil Co. in Colorado.

Vawter noted that this work is still in the research, development, and demonstration phase but he also expects gradual US oil shale development with possible production rates of 100,000-200,000 b/d in the next 25 years. He also noted that oil shales have much potential in many parts of the world.