Sugarloaf Gas and Condensate Project >> The background, history & advantages of shale developments
Gas shales are categorized as an unconventional reservoir. These reservoirs differ because they are continuous in nature and are not bounded by sealing mechanisms in the same way a traditional reservoir is. Typically the shale gas reservoirs have very large in place volumes and in many cases have acted as the hydrocarbon source rock for conventional reservoirs. However, the physical characteristics of shale make them relatively poor quality reservoirs and whilst they have been known to contain hydrocarbons, it is only with evolution of technology that it has become possible to ‘harvest’ an economic volume of those hydrocarbons.
The key driver for unlocking the gas shale plays has been advances in technology allowing long horizontal wells to be drilled and the relatively poor reservoirs to be stimulated enabling recovery of the vast hydrocarbon volumes that are in place.
In the USA a number of shale plays have been developed, where differing geological composition and technology advances has allowed some of the source rocks to be developed as reservoirs in their own right. As industry understanding improves, the characteristics that allow any given shale to be developed as a reservoir are being better understood.
At the moment, the Eagle Ford Shale is considered one of the best resource plays in North America. Wells drilled in the Eagle Ford Shale are showing strong initial production rates and ultimate recovery of hydrocarbons per well within a cost structure that makes the play commercially attractive. The added benefit with the Eagle Ford Shale is that a high proportion of the hydrocarbons produced are condensate liquids (or light oil) which attracts a significant premium over gas at current prices.
Over the last few years other gas shale plays, the Fayetteville, Woodford, Marcellus and the Haynesville, have become major development areas. Each has been subject to significant investment by both international an US based upstream oil and gas companies such as Shell, BP, Norske Hydro, Repsol, British Gas, Anadarko, and Petrohawk.
The logic behind these transactions is that huge resource bases are being acquired and unlike offshore developments where the majority of capital is committed prior to production, investment in the resource plays in the US, such as the Eagle Ford Shale, can be scaled to match demand and commodity prices with a relatively short lead time. The US is the largest energy market in the world and infrastructure is well developed. The resource potential of the shale plays is very large and relatively well established therefore production can be ramped up or down by increasing or decreasing development drilling activity.
“The biggest development of the first decade of the 21st century is not solar, not wind, but unconventional gas.”
(Source: Daniel Yergin, Chairman, Cambridge Energy Research Associates, January 2010)