Last month, the U.S. Energy Information Administration (EIA) reported that tight oil production in this country had reached an average 3.22 MMbpd by the end of 2013. This raised overall crude production to 7.84 MMbpd, or about 10% of total world production. Out of the U.S. total, over 40% is tight oil. This is what they mean by “disruptive” technology. Just nine years ago, there was barely a hint of the unconventional revolution to come.
For the most part, tight oil is a North American phenomenon, with a few minor exceptions around the world. Tight oil in the U.S. represents 91% of the total, with Canada producing the remaining 9%.
Outside of North America, only Russia has produced commercial quantities of tight oil. The 0.12 MMbpd of tight Russian oil production during 2013 represented about 1% of the total. Mostly, hydraulic fracturing and horizontal drilling technology have been used to help Russia continue to produce oil from its older fields, many of which have been in a steady decline. Russia’s main oil-producing region is in West Siberia, accounting for about two-thirds of the county’s total production.
Lukoil, Russia’s second-largest oil-producing company, is using multi-stage hydraulic fracturing to slow the decline of crude output at several West Siberian oil fields. Also, Rosneft, Russia’s leading oil producer, reduced the decline rate in one of its fields to just 7%, with the ambitious goal of a 1% decline rate by 2016.
It has been noted that, on several occasions in recent years, Russian officials have warned Europeans that hydraulic fracturing is a substantial danger to public health and the environment. The fact that Russia, itself, has been using this technology for several years on its legacy oil fields in West Siberia, and is beginning to utilize vertical and horizontal drilling to extract gas and oil from shale deposits, has gone unremarked. One might be forgiven for suspecting that the Russian government is resisting the idea of Central European countries developing their own secure energy sources, which might threaten Russian’s near-monopoly on gas supplies to Europe.
Many European environmental groups, especially in Germany and France, have heeded these Russian warnings, without the slightest sense of irony.
Elsewhere. Unconventional petroleum resources, oil and gas in various forms, exist in most regions of the world. According to EIA, those countries with “significant” unconventional resources are: Abu Dhabi, Algeria, Argentina, Australia, Canada, China, Colombia, Germany, India, Indonesia, Mexico, Oman, Poland, Russia, Saudi Arabia, Ukraine and the UK.
Of course, hydrocarbon energy potential and political will are two different things. According to Keith C. Smith of the Center for European Policy Analysis (CEPA), “The supporters of hydraulic fracturing ... have been surprised by the amount of fear and hostility that exists in parts of Europe regarding this relatively safe method of extracting a source of energy that emits significantly less carbon and other pollutants than does coal or diesel fuel. There have been noisy demonstrations in every European country where [fracing] has been attempted. Opponents are traveling from one country to another in order to protest, usually against the operations of Western companies ... Funding for protest rallies is flowing to Central Europe from groups in Western Europe, where fracing is not even being considered.”
Fracing bans have been enacted in Austria, the Czech Republic, France, Germany and Italy. In short, development of tight oil resources in Europe must wait for the tide of opinion to shift against a dependence on strong foreign economic and political interests. Given the stakes, this shift is probably inevitable, but it will take time.
In the Middle East, Abu Dhabi may have significant unconventional resources, but that has not made them a friend to fracing, at least not Western fracing. “Promised Land,” the anti-fracing film, was bankrolled, in part, by a production company owned by the government of the Arab emirate.
Friendly territory. In 2013, the Mexican government did what critics doubted could ever be achieved—overturn the 1938 laws nationalizing the oil industry. This opened up Mexico’s energy resources to private help and investment, and it may finally allow the country’s oil production to reverse a 10-year slide.
Interestingly, it was the PRI (the Revolutionary party)—which nationalized oil in the first place—that finally caved to reality and passed the reforms. Mexican officials have watched with envy, as the U.S. experienced a surge in both oil and gas production. Oil output in Texas, alone, surpasses that of Mexico. The country’s tight oil resources, and its considerable deepwater potential, will take years to develop. But if terms are attractive enough to compete with U.S. shale plays, then U.S. companies and others will come along.
South of the equator, Argentina has been a hub of unconventional oil and gas activity following shale gas and tight oil discoveries in plays, such as the Vaca Muerta and San Jorge. The Vaca Muerta in Neuquén is estimated to hold 16 billion bbl of shale oil and 308 Tcf of shale gas.
Argentina’s unconventional reserves are prolific—the country is estimated to hold the world’s fourth-largest reserves. However, restrictions on the import of drilling rigs, materials and tools are prohibiting access to technology and services. Because of a lack of well data and import limitations, Argentina hasn’t begun to fully capitalize on the abundant reserves that are present.
However, recent test wells and exploration results have encouraged further investment, both domestically and internationally, meaning development is now accelerating. A foundation of efficient drilling and completion practices, including multi-pad drilling, casing design, and proppant and frac fluid selection, needs to be established, to drive the development and economics of Argentina’s unconventional oil and gas production.