Technological advances have transformed the global market for natural gas

Technological advances in the extraction of natural gas from shale rock in the past decade have transformed the global market for this commodity.

The combination of hydraulic fracturing and horizontal drilling have led to forecasts that the US has up to 100 years supply at current usage rates.

Just a few years ago, there were dire predictions that supplies were so low and demand so high that the country would be the world’s biggest importer of liquefied natural gas by 2010.
Nobody saw the shale finds coming.

“The technology used to access natural gas from shales is as complex and sophisticated as that used in the Apollo Space Programme,’’ says John Pinkerton, chief executive of Range Resources, the independent oil and gas company.

He adds: “The industry is always improving the process. Every six months or so, there is some tweak that makes the wells incrementally better and cheaper. And that in turn opens new areas to production.’’

That holds true for the entire energy sector.

Advances are often incremental, leading to improvements in finding, extracting and producing that receive little attention in the wider world, but make the industry one of the most high-tech of any.

GE Oil & Gas notes that it has been pushing the boundaries of subsea drilling for more than 50 years. The current water depth drilling record of 10,011 feet was achieved with its VetcoGray and Hydril Pressure Control systems.

The industry has gone from 3D seismic technology to help find resources to now 4D seismic.

Natural gas is now cooled and liquefied so it can be compressed in tankers and shipped around the world.

In control rooms in Houston, companies can see live data from wells. And wind energy producers now use radar to judge where the wind is coming from, to better position propellers.

“The amount of engineering innovation cannot be understated,’’ says Jorge Leis, head of Bain’s North America Oil & Gas practice. “Every step of the value chain is seeing unbelievable progress.’’

That goes for energy efficiency as well, where rapid advances are being made, from more energy-efficient lightbulbs to the creation of a supergrid.

“The most meaningful advancement has been the financing available for renewables projects,’’ says Parker Weil, co-head of energy and power investment banking at Bank of America Merrill Lynch.

“In parts of Europe [Germany and Spain], there was an attractive feed-in tariff that spurred wind and solar development. In the US, the tax equity product was what enabled a majority of the wind and solar development.’’

Ali Ferling, managing director, Worldwide Oil and Gas Industries for Microsoft, believes that the key to moving these advances forward in the oil industry has been a change of mindset that allows outsiders into these once closely guarded industries.

There was a time, he says, when the “Big Oil” companies would not seek help from a Microsoft or any other high-tech company for fear proprietary information would leak out.

However, there is now acceptance that outsiders can be trusted, he says. This has enabled the industry to improve its operations across the board.

He cites Microsoft’s ability to sell BP a Hurricane Management System that combines 3-D satellite imagery and real-time weather data with a visual representation of BP staff and facilities, so that the company can better manage its response to storms.

Ben Thuriaux, principal at Arthur D Little, the consultancy, says that, over the past six years, there has been a large increase in technology investment by some of the national oil companies, such as PetroChina and Petrobras.

Publicly available data for CNPC/Petrochina, he says, suggest that research and development investment is increasing rapidly and there is a good chance that from 2009 onwards, it will lead in this regard.

The Chinese now see mastery of technology as a crucial component of their internationalisation strategy. They believe that proven technology can facilitate access to resources, he says. Their research institutes also provide a steady stream of technical staff.

As the competition for new technology broadens, advances are likely to come even more rapidly, and the industry certainly believes there will be enough of them to keep companies in the energy game for many years to come.

“The end of fossil fuels is greatly overplayed,’’ says Laurence Rosenblatt, a former ExxonMobil executive and now president and chief operating officer of MA Gales, a privately owned energy acquisition, holding, management and consolidation company.

As proof he points to the shale gas finds: “No one started looking for natural gas until about 10 years ago.’’

Now new fields are cropping up across the country and the hunt is on for them around the world.

Source: Financial Times