Penny Hitchin, UK
With forecasts of a new ‘dash for gas’ in the coming years, particularly in Europe, how does that marry with reports of rapidly declining traditional natural gas resources and growing concerns over supply security due to geopolitical issues? Could unconventional gas hold the key?
Can we expect to see a ‘dash for gas’ in the near future? The answer depends on who you ask, but Europe, and potentially the US, are the most likely candidates as they look to install quick-to-build, flexible, efficient and economical new capacity, with a less polluting footprint than coal fired power stations – combined-cycle gas turbine plants fit the bill nicely.
According to the 2010 edition of the International Energy Outlook from the US Department of Energy’s Energy Information Administration (EIA), natural gas will be the second fastest growing source of power generation (after renewable energy) in OECD Europe, increasing at an average annual rate of 1.3 per cent between 2007 and 2035. Also, in the United States there has been a significant increase in the number of orders for gas fired power plants, primarily to replace old coal plants.
But, as so often in life, things are far from simple. Fears that traditional natural gas reserves, such as the North Sea, are declining rapidly, coupled with Russia’s continued dominance over Europe’s gas supply and the location of other rich reserves in less politically stable countries, has muddied the waters, and could prevent this boost in gas fired generation before it has begun.
There now appears to be alternative, one that is less ‘conventional’. Could the greater exploitation of the world’s ‘unconventional gas’ resources hold the key? In this article we look at the different types of unconventional gas, explore their potential – especially shale gas and coal bed methane – and look at what different countries are doing to exploit this resource.
In 2009, a boom in the United States’ exploitation of its indigenous unconventional gas resources – roughly equal quantities of shale gas and coal bed methane – helped propel the country past Russia as the world’s largest producer of natural gas. Thus, a rapid transformation of the world’s gas markets is underway as technology is developed and applied in new ways, enabling the economic exploitation of unconventional gas resources.
This transformation will continue. China, for instance, with the impetus of a booming economy and limited conventional natural gas resources, is already planning to develop its coal bed methane, shale gas and tight gas resources.
What is unconventional gas?
Unconventional gas resources broadly have the same composition as natural gas but are in locations that, until recently, were hostile to extraction. Standard drilling techniques, for instance, can be defeated by impermeable rock. Specialized methods such as horizontal drilling or hydraulic fracturing with a combination of high pressure water and sand are now overcoming difficult geology.
The exploitation of unconventional gas has been driven by three key breakthroughs: horizontal drilling, subterranean hydraulic fracturing and 3D seismic imaging, which has helped increase the reliability of prospecting so that two thirds of gas wells drilled are now achieving commercial potential, up from one third 20 years ago.
The five main types of unconventional gas are: tight gas, coal bed methane, shale gas, ultra-deep reservoirs; and gas or methane hydrates. Underground coal gasification (UGC) is likely to further open the sector because drilling technology developed in the oil and gas industry enables the conversion of coal reserves into synthetic gas in situ for piping to the surface.
Shale gas: US leads the way
In terms of global unconventional gas reserves, North America is extremely well placed, with 233 trillion m3 of worldwide resources estimated to total 922 trillion m3. While gas is conventionally mined from folds and pockets in sandstone, techniques developed in the US over the last decade can now extract gas locked within shale.
Real time US rig data from December 2010 shows rising shale and unconventional gas activity. There were 948 onshore rigs drilling for natural gas in North America, an increase of 295 over the previous year. The data do not distinguish between conventional and unconventional gas but of the 753 rigs drilling in Texas most are working in Eagle Ford Shale, Permian Basin and Haynesville Shale. In Pennsylvania 100 rigs were drilling for shale gas in Marcellus Shale deposits.
The key to exploiting shale gas is an occasionally controversial combination of horizontal drilling from a single surface location with subterranean hydraulic fracturing, known as ‘fracking’. Fracking involves injecting a mixture of sand, chemicals and fluid into the well under very high pressure so that it spreads through the horizontal drill paths causing fissures in the rock to shatter, releasing the gas and giving it a route to the production well. A ‘propping agent’ such as sand or ceramic beads is then pumped into the fractures to keep them from closing once the pumping pressure is released.
Environmental opposition to shale gas fracking exists and centres on the fear that toxic chemicals can migrate into ground water. The UK’s Manchester University’s Tindall Centre published a report in January 2011 that recommends a moratorium on shale gas exploitation until the results of a US federal investigation into the safety of the extraction processes are known.
Shale gas worldwide
All current estimates for world gas shale resources use Rogner’s 1997 study of world hydrocarbon resources (see Table 1). On the assumption that about 40 per cent of this would become recoverable, The International Energy Agency’s (IEA) World Energy Outlook 2009 estimates a potential global shale recoverable resource of 180 trillion m3.
Europe is showing growing interest in shale gas, but the lack of large surface areas could rule out a replication of the US shale gas boom. The IEA identifies access to land, particularly in areas of high population density, as the most significant limitation. It says shale gas extraction has a “comparatively large and invasive footprint on the landscape, because of the nature of drilling operations and the large number of wells needed to produce a given volume of gas.”
European exploration has identified three promising resources: Alum Shale in Sweden, Silurian Shales in Poland, and Mikulov Shale in Austria. In 2010, Cuadrilla Resources became the first company to drill for shale gas in the UK sinking a borehole near Blackpool targeting gas in the Bowland shale 3 km (10 000 feet) below the surface.
|Shale gas offsets the decline in other US gas supplies to meet consumption growth and to lower import need (1 trillion ft3 = 0.028 trillion m3) Source: EIA|
China and India both have many gas shale basins in the early stages of evaluation. China aims to raise its annual production capacity of shale gas to 15–30 billion m3 by 2020. China’s major gas producer PetroChina Company Limited signed an agreement 13 months ago with Shell to jointly develop shale gas resources. Drilling started on the first evaluation well in a 4000 km2 shale gas block at Fushun in Sichuan province in December last year.
In South Africa, Statoil Chesapeake and Sasol are assessing the prospects for shale gas in the Karoo Basin. The joint venture holds a Technical Cooperation Permit (TCP) for an area of about 88 000 km2, primarily in the Free State. The TCP awards the applicants exclusive right to study the prospectivity for shale gas but does not include any surface activity or drilling.
Gas shale exploration is also underway in other parts of the world, including Australia and New Zealand.
Coal Bed Methane
Underground coal reserves consist of gas as well as solid fuel. This methane gas has historically been a major hazard but could prove a valuable resource.
Extracting coal bed methane (CBM) requires wells to be in contact with a large area of the coal seam. As with shale gas, the ability to drill horizontally from one source has been a key development. Water is then pumped out from wells to lower the pressure in the immediate area, forcing gas trapped in the coal to flow to the surface.
Coal bed methane production is well established in both North America and Australia, which exports the gas as liquefied natural gas (LNG) notably to China, Japan and South Korea.
China is also keen to develop its own production. Five years ago Beijing set an ambitious production target of 5 billion m3 of CBM per annum by 2010. In 2008, state-owned China United Coalbed Methane Company lost its monopoly, which has energized the sector. Last year PetroChina announced a $1.5 billion CBM investment plan with a target annual production of
4.5 billion m3 of the gas by 2015.
PetroChina is also involved in a joint venture with BP in Xinjiang province. Another Chinese oil producer, Sinopec, has plans for CBM resources in Shanxi province, aiming to produce 2.5 billion m3 by 2015. Foreign oil and gas companies including Shell (Inner Mongolia) and ConcoPhillips are also developing CBM projects in China.
In addition to providing energy, drawing off methane from China’s notoriously gas-heavy coal mines could improve mine safety. Most of the country’s coal reserves are in the north or northwest of the country while the demand for power lies thousands of kilometres away in the southeast. Construction of the necessary infrastructure is behind schedule: ten pipeline projects were due to be ready in 2010, but only two were completed on time. PetroChina and Sinopec have virtual monopolies over China’s pipelines, ensuring their places as key players in CBM.
Underground Coal Gasification
Nearly 85 per cent of known global coal reserves cannot be extracted with current mining techniques. Underground coal gasification (UCG) is an
in-situ gasification process particularly suitable for such deep and inaccessible reserves of coal.
UCG is an extraction and a conversion process in one step, producing a high quality, affordable synthetic gas, or syngas. Two boreholes are drilled from the surface into the coal seam. One supplies oxygen and water/steam for a partial combustion process, and the other brings the product gas to the surface.
UCG was first developed in the former Soviet Union during the 1930s and commercial-scale schemes were established after the Second World War, with a project in Uzbekistan still operating today. Increasing energy and oil prices have created a global resurgence of interest in UCG, with pilot and commercial plants being initiated in North and South America, Europe, China, Australia, New Zealand, South Africa, India and the UK.
Austalia’s Linc Energy ran a successful demonstration UCG trial in the state of Queensland, between 1999 and 2003, involving the gasification of around 35 000 tonnes of coal.
UCG is a major part of India’s energy policy, as well as its 11th five-year economic development plan. India has the fourth-largest coal reserves in the world and plans to use UCG to access an estimated 350 billion tonnes of coal, reducing dependency on imports.
South African companies Sasol and Eskom both have UCG pilot facilities. Eskom uses UCG syngas to fuel the boilers of the pilot plant at its Majuba power station in Mpumalanga. A $3 billion, 2100 MW IGCC power station will use syngas from an adjacent commercial-scale UCG project.
China has about 30 projects featuring UGG in different phases of preparation. Its first UCG project was a $112 million joint venture between Hebei Xin’ao Group and China University of Mining and Technology in the Northern Inner Mongolia Autonomous Region. The project is designed to produce 1.5 million m3 a day of syngas as well as generate 32.4 million kWh/year of power. Fifteen other UCG demonstration projects are underway, including one in collaboration with US utility Duke Energy.
Vietnam Coal and Minerals Corporation (Vinacoal), Marubeni and Linc Energy plan to use UCG technology to develop about 30 billion tonnes of bituminous coal reserves in the Song Hong (Red River) Delta for power generation. Marubeni initially provided $100 million to explore the area.
In Pakistan’s Thar coalfield, Cougar Energy UK and the Sindh Coal Authority are developing a 400 MW power project that will gasify coalfield reserves.
The UK has plentiful reserves of deep coal which will never be mined. The UK Coal Authority has issued 14 permits for offshore UCG trials. In January 2009, Thornton New Energy was licensed to develop coal in Scotland’s Firth of Forth lying between 1000 metres and 2000 metres below the surface and inaccessible to traditional mining technology.
Thornton New Energy plans to develop the first large-scale commercial UCG project in the UK
In a joint venture with Australian mining company Riverside Energy, Thornton New Energy wants to make this the first large-scale commercial UCG project and one that could be replicated elsewhere. The company believes that the Firth of Forth site has 1 billion tonnes of accessible coal, sufficient to run a 400–600 MW power station for 60 years, but investment of upward of £100 million ($160 million) will be required to realize this.
Tight gas is the term used for natural gas produced from sandstone or carbonate rock reservoirs with very low porosity and permeability.
Hydraulic fracturing is the key technology for extraction of tight gas. Currently commercial tight gas production is not found outside the US and Canada although exploration is underway in Europe, Australasia and Latin America.
Gas market outlook
Developing unconventional gas resources is already beginning to redraw the atlas of the world’s energy resources. In North America, a third of Canada’s and over half of the US’ gas output now consists of unconventional gas. In the United States, shale gas alone is expected to make up 45 per cent of gas production by 2025.
Nobuo Tanaka, executive director of the IEA, summed up the situation perfectly when he said: “Unconventional gas is unquestionably a game-changer in North America, with potentially significant implications for the rest of the world.”
If we accept that unconventional gas is now mainstream, surely it is now time to change its name?
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