Forget the Term “Unconventional Gas”

In his presentation entitled Shell’s Unconventional Gas Challenges, Stan Goense, Vice President, Wells, Contracting and Procurement at Shell said he would make a qualification to the term “unconventional gas” at that CEE Unconventional & Shale Gas Development Forum in Budapest, Hungary.

“There’s a lot about the public perception,” he began, “how we have actually presented ourselves as an industry in trying to convince communities and all the stakeholders that we really mean serious business when we’re talking about being a reputable.

“We’re trying to do away with the term unconventional gas,” explained Mr. Goense, “because if it’s unconventional then ‘that must be new, that must be high risk,’so we’re talking about tight gas, shale gas and coal bed methane. It’s a shift we’re trying to make in trying to address the perceptions in the general public.”

In the context of developing economies whose growth was staggering, he mentioned rising natural gas demand: 60% globally between 2008-35.

“When we’re speaking about these gas reserves - tight gas, shale gas and coal bed methane - we speak about the three A’s: there’s extreme abundance, it’s acceptable, and it should be very affordable as well,” he said.

According to him, there was an anticipated 250 years of reserves still available for all gas reserves in the world. “There probably will be more,” commented Goense. “I think we’ve always underestimated.”

Additionally, for tight gas, shale gas and coal bed methane there was an extra 380 tcm of recoverable reserves, according to an IEA figure.

He said of gas, “It has a 40% higher energy efficiency, especially compared to coal and emits 50-70% less CO2. In terms of affordability, capital investment is a lot less, especially compared to coal or nuclear.”

But the question remained whether unconventional gas reserves could be developed. He showed an estimate for production in 2030 and mentioned the US possibility for becoming a net exporter of natural gas, but noted that the Henry Hub price had gone down, that week to below $2.

Mr. Goense queried: “Do you have the development cost which can actually make it competitive? That is an extreme challenge. We also see in the US a shift to more liquid rich plays as well and the number of rigs happening at the same time.”

He said that Shell was estimating more than 700 bcm of unconventionals by 2030.

Shell, he said, had been very active in shale gas and tight gas in the Americas, and had had successes in Pinedale.

“We’ve gained lot of experience working in the Haynesville together with Encana, but have also put our feet into the fire in terms of development cost, and we have to be extremely competitive there when we’re talking about $2-2.50 Henry Hub prices per Mm BTU.”

Shell had also gone into Marcellus as well, being involved earlier, as well as in the Eagle Ford.

He reported: “In Ukraine we are planning to spud wells this year. We’re fairly excited about the prospect – three wells are planned. There are many good reserves expected in the Ukraine. We believe in a very strong partnership and hope to be successful in that area there as well.”

Mr. Goense also gave mention to projects in China, where the company was involved in CBM, for one. He said Shell was also in the Karoo basin in South Africa, where it was pitching its value proposition and hoped to be successful in the near future.

“There are many other fields and concessions which we are interested in and where negotiations are ongoing,” he added.

He went on to introduce Shell’s Five Operating Principles, but started off by mentioning how the Gasland video had been very detrimental to unconventional gas operations in Queensland.

Goense commented, “It’s being quoted as ‘hear all the facts’ and ‘Shell, how are you going to make sure it doesn’t happen to us?’ Obviously, we have not been proactive enough to address that and make sure that in laymen’s terms that we are operating at the highest and most safe standards within the industry.”

All such experiences, he said, had been accumulated to come up with Shell’s Five Operating Principles.

He explained, “Our CEO Peter Voeser recently presented these and has spoken about them as well. You take the fist one on Safety and Well Integrity, and that’s basically demonstrating that we will ensure that when every well is being designed, constructed, operated and abandoned, it’s done at the highest operating standards.

“Furthermore, on water’s three aspects: make sure we use the least potable water; reusage of water as well, making sure it’s basically a contained system, zero discharge, and using a minimal amount; another element is having no contamination to groundwater.”

He also mentioned air: “Making sure fugitive emissions are kept to an absolute minimum.” And footprint: “There’s lots of work to make sure we have the least impact to environment with the drilling pad.

Finally, community. He explained, “Working with community, being humble and making a positive impact and being seen as good neighbors.”

“We believe these will focus all of our staff and focus on how we look at future of tight gas and shale gas operations,” explained Goense.

In terms of the R&D of tight gas and shale gas operations, he reported that Shell was looking at things like microseismic to reduce the footprint of drilling operations.

“Through the introduction of these technologies, we are looking at further production optimization – there’s a learning curve, either in Pinedale or Haynesville, where we see reductions in delivery and cost reductions.

Regarding hydraulic fracturing, Mr. Goense suggested, “Be open with communities, regarding the contents of fraccing fluid: 99% water, 1% of chemicals. We support being 100% transparent about what’s in the fraccing fluids.

“Making sure you have well integrity 100% of the time,” he added.