Shale's Benefits for Europe: Speaking in the Conditional

Shale gas could have real benefits for Europe, according to Connie Jump, Senior Technical Director, Chevron Onshore Europe, who spoke at Unconventional Gas Aberdeen 2014. 

But she said the keyword was "could," as the industry was only now entering the exploration phase in Europe.

Among those benefits were economic growth, jobs, energy security, security of supply and price, a cleaner fossil fuel, etc. She commented, “We are so early still in the exploration phase. There's so much more to understand yet – we can't claim anything yet, as is also the case in the UK.”

Recalling that she had been concentrating on shale since 2005, Ms. Jump offered North American examples like the Fayetteville, Barnett or Marcellus. Today, she said Chevron was working on the Silurian shale play in Eastern Europe, the topic of her presentation.

Ms. Jump remarked that the Chevron brand was not yet recognized in Eastern Europe, so citizens were not aware that the company had 66,000 employees, that safety and environmental stewardship and the highest ethics were part of the company's core values.

“We're one of the leading international oil companies, but it's difficult to get that across just by saying 'we're Chevron – trust us, we're big and we're going to do it right.'”

Global demand for natural gas was growing, as were all elements of the global energy mix, she noted. “It's not that natural gas from shale is pushing any of the others out,” she explained. “It's going to take all these sources of energy to meet this demand – but fossil fuels remain the bulk of the energy mix, especially oil and natural gas.”

She noted that resources did not equate with reserves. Still the payoff of going for shale had meant millions of jobs, billions of dollars in annual revenue, and USD 2,000/year savings per household by 2035. “In Pennsylvania alone 200,000 direct and indirect jobs have been added because of the Marcellus shale, and the annual wage of an oil and gas worker is USD 40,000 more per year than the other industries in Pennsylvania – so this isn't 'chump change' but an important thing,” said Ms. Jump.

She said that this was the model, and that hopefully some form of it could be translated for Europe.

Regarding the number of exploration wells that had been drilled in Europe, she said that there had been just a couple in the UK, 40 in Poland, of which 16 had been fracked. “Four of those are horizontals that have been fracked and we're still considering ourselves in the exploration stage – Poland is a giant country, so 40 wells peppered all over different basins, formations - that's not enough, we need more time.”

She noted that in the US a “wildcat exploration well” in the Marcellus meant drilling in an area where 400,000 wells had already been drilled.

“We know exactly where the shale is, how thick it is, the source rock has been studied for decades; the only thing, is if we drill horizontal, do a multistage frack, will it produce economically?”

In Europe, these were all still open questions, according to her, a different starting point, not to mention the different infrastructure, pricing, regulatory framework and the supply chain, which would require some gearing up.

The potential, she opined, was still there, as were the benefits. Ms. Jump suggested that Europe might even explore its shales to be aware of national reserves in case of an emergency.

Regarding rig movements, she said, “It's no big deal to move a rig from Texas to Pennsylvania in the US, but how about from Romania to Lithuania? Not so easy.”

Of the Silurian shale play, she said it comprised approx. 5 million acres in a strip of sorts, which prompted Chevron to set up a presence in what the company believed to bear black shale. It had won licenses and set up some presence in the five countries above the formation:

Ms. Jump reported that in 2013 Chevron had drilled two wells in Lithuania with a partner, and the company had plans to bid on another tract, but the fiscal and regulatory climate had changed. “We're looking for a stable investment environment – they can't keep changing the tax law. We need to know what we're getting into, so we declined that second license.

Meanwhile, Chevron had drilled two wells last year in Poland, making for total of four in the country. “On two of them, we've plugged and abandoned as we did not find what we were looking for and were restored back to the original site,” she said, adding that results and 3D seismic of the other two were being studied.

In Romania a 2D seismic line had been started, while a production sharing agreement was signed in Ukraine last November; Bulgaria, she noted, had a ban on fracking which had halted activity there.

For 2014, she gave Chevron's rundown: “In Lithuania, we're just finishing our third well, in Poland we've finished the 3D and have a memorandum of understanding with the Polish national oil company, so now maybe things will go smoother – we may possibly combine acreage.

“And in Romania, we finished the 2D seismic down in the South and Chevron was spudding its first well in northern Romania.”

She showed delegates a great diagram of an exploration well and spoke of how Chevron located the “sweet spot” of the shale and the process of deciding when to go horizontal in the pilot phase. “But in all cases, protecting the groundwater, setting the numerous strings of casing and cement that we've set for decades are all part of best practices.”

Staying away from faults, she said, was also crucial as drillers did not want the energy expended to go into a seismic fault which would diminish the effectiveness of a hydraulic fracturing operation. It was also necessary to work with communities and land owners to find the best spot to drill and frack.

After a well had successfully produced, Ms. Jump showed how operations were reduced down to a less intrusive well pad, restoring the previous site.

“All of this takes a long time and we're still in the exploration stage – 3-5 years just for exploration. We have to find something, and in a success case it could last for 40 years, and we're going to hire a lot of people. We've used 50-60% local companies at our Poland and Romania wells, so it does have this local impact and benefit to the community,” said Chevron's Connie Jump, who added that the only way to find out if the black shale was there was to drill for it.

Drew Leifheit is Natural Gas Europe's New Media Specialist.