Last year, only four countries in the world were producing commercial volumes of either natural gas from shale formations (shale gas) or crude oil from tight formations (tight oil): the United States, Canada, Argentina and China.
Since losing energy self-sufficiency in 2010, Argentina is reported to have spent some $US50 billion in oil and gas imports, but recent attempts at developing what are some of the largest shale oil and gas prospects globally have been stifled by plummeting oil prices.
It is understood that exploiting the Vaca Muerta (which means "dead cow") shale oil and gas field in the Neuquen province in Patagonia may need between $100 billion and $200 billion in investments, and local analysts have suggested it is highly unlikely that many large players would be drawn in the face of Argentina’s “feeble” institutional framework.
Yet the Energy Information Administration (EIA) in the US said that a plethora of international companies hold leases in Argentina and have drilled wells in shale formations.
Much of the initial activity has targeted shale oil and natural gas in the Neuquen Basin's Vaca Muerta shale formation, in west-central Argentina.
National energy company Yacimientos Petroliferos Fiscales (YPF), the largest shale operator in the country, reported production in 2015 of 22,900 barrels per day of oil and 67 million cubic feet per day of natural gas from three joint ventures in Vaca Muerta.
Of these, one was with Chevron at the Loma Campana field, a second was with Dow Chemical at the El Orejano field, and a third JV was with Petronas at La Amarga Chica field.
China has drilled more than 200 wells over the last two years, while Argentina has drilled more than 275 wells.
“Each country has the potential to significantly increase production of shale gas and tight oil,” the EIA said.
China's national oil company Sinopec and Russia's national oil company Gazprom have also recently signed a memorandum of understanding with YPF to jointly develop shale from the same basin.
China has targeted the Longmaxi formation in the Sichuan Basin in south-central China as its initial shale gas exploration and development objective.
While several international companies are active in China, the EIA said much of the early effort had been led by Sinopec and China National Petroleum Corporation's PetroChina, two of China's national oil companies.
According to China's Ministry of Land and Resources, these two companies are on schedule to reach 600MMcfpd of shale gas production by the end of 2015.
CNPC has drilled 125 shale wells, bringing 74 of them into production, and is on schedule to produce 250MMcfpd of shale gas by the end of this year.
The EIA reported last week that Sinopec had a commercial-scale effort underway at the Fuling shale gas field in the Sichuan Basin, currently producing 130MMcfd.
By the end of 2014, Sinopec completed 75 test wells at the Fuling field, with plans to drill an additional 253 wells.
Other countries have also begun to explore shale gas and tight oil, including Poland, Algeria, Australia, Colombia, and Russia.
Mexican mojo
Shale oil and natural gas exploration drilling is also underway in Mexico, particularly in the country's portion of the Eagle Ford Shale and in La Casita formation within the Burgos Basin in northeastern Mexico.
In May, the national oil company Petroleos Mexicanos (Pemex) released the results for 13 of its shale exploration wells, with 10 of these categorised as commercial. These 10 shale gas wells have initial production ranging from 2 to 11MMcfpd.
Pemex also drilled three horizontal wells into the Tampico-Misantla Basin's Pimienta formation in 2013, and the company plans to complete all three wells this year.
However, the US Energy Information Administration said last week that while other countries outside the US, China, Canada and Argentina have started exploring hydrocarbons from shale and other tight resources, but they are still short of reaching commercial production.
Perth ‘the place to be’
With Western Australia’s Canning and Perth basins still a long way away from development and the Cooper Basin still reeling from doubts confirmed by an oil price-damaged Chevron pulling out of its commitments there, interest has more recently on the Northern Territory’s Beetaloo Basin.
It is here that Australian major Origin Energy (35%) started a three-well drilling campaign, with South Africa’s Sasol Petroleum (35%) and TSX-Venture-listed Irish concern Falcon Oil & Gas (30%) in Exploration Permit 98 in late May, targeting what is believed to be one of the largest undeveloped shale plays in the world.
Origin and Sasol have the option to pull out if they’re unsatisfied with Phase 1, with Phase 2 to involve a 90-day production test on two fully fracced horizontal wells, before another two horizontal wells to be drilled, fracced and production tested in a planned Phase 3.
Canadian journalist-turned-analyst Keith Schaefer is excited by Falcon’s opportunities here, as it is free carried over a $200 million nine-well program targeting the Middle Velkerri – the Beetaloo’s biggest, thickest formation which has the most oil and gas resource in place.
Falcon’s 30% stake exposes it to 1.38 million net acres of the Beetaloo – the equivalent of 17% of the entire Bakken play in the US. In the Eagle Ford, it would be 23%, according to Schaefer.
“Non-producing acreage in the Bakken and Eagle Ford can be worth up to $US20,000 per acre,” Schaefer said.
“We have no idea if the Beetaloo is going to be commercially viable, but if it is and Falcon’s acreage is worth even a small percentage of what raw land goes for in the Bakken and Eagle Ford.”
That “if” is a fairly big one, however.
Statoil’s venture into Aussie shale ended badly, with court action averted in June last year after Statoil, Baraka and Canadian concern PetroFrontier jointly agreed that Baraka would withdraw its claim that the 2014 work program and budget was “invalid”
Statoil and PetroFrontier had also claimed that Baraka was in default under each joint operating agreement in the Beetaloo as a result of Baraka not paying cash calls in respect of the 2014 work program and budget – a claim they agreed to withdraw.
While acknowledging the enticing nature of the Beetaloo’s thick shales, Australian analyst Peter Strachan is more sceptical than Schaefer.
“These are very old rocks,” Strachan said of the Beetaloo, speaking to Energy News.
“There’s no doubt the carbon contents are good and clay contents are low so it should frac and so forth, but Statoil spent $45 million and drilled through shales and it all looked really good, but when they fracced they didn’t get a molecule of gas to surface.
“It is also very remote. It’s not like being in the Cooper Basin where you’ve got pipelines and gas processing facilities in place. There are no roads. This is the desert – there’s nothing there.
“A lot of it is aboriginal ground and Native Title is an absolute complete muddle up there.
“It’s just a nightmare to try get anything done in northern, or even northwest Australia. Look at the difficulties Buru Energy has had trying to get traditional owner agreement with three competing claims over the area [in the Canning Basin].
“There are a lot of technical issues. You can’t write it [the Beetaloo] off technically, but early work has not been promising.”
From an unconventional point of view, Strachan believes the Perth Basin is “probably the place to be”, with the recent work at Senecio and Waitsia that AWE has done there with Arrowsmith and the like showing encouraging signs.
While Senecio is a tight gas discovery, the Waitsia field below it is conventional.
While AWE has found the right types of shale, Strachan said the company was yet to frac any wells “hugely successfully”.
“Arrowsmith did produce gas to the surface. In the Cooper you have these tight sands which need to be stimulated. Real Energy and Santos to the south with Origin is looking at the Patchawarra and other formations where they’ve had gas to the surface from conventional completions.
“So the feeling is that with a little bit of stimulation they should get commercial flow rates.
“So I think the Cooper Basin is going to go; and the Perth Basin will go before these frontier-type targets in the Beetaloo.”
