Interest in the Sahara desert grows as the potential for shale gas - and a lot of it - seems to become more apparent.
Do the Sahara desert and the state of Pennsylvania have anything in common?
Yes, they do.
It’s shale gas.
An abundance of shale gas.
The International Energy Agency (IEA) has estimated that Algeria harbors 231 Tcf of recoverable shale gas, with a value close to $2.6 trillion at current UK prices. The resource is sufficient to supply the entire European Union for a decade.
This is good news given that shale gas action in Europe has had its share of fits and starts, owing mainly to regulatory issues and disappointing drill tests.
France flat-out outlawed hydraulic fracturing, and the UK ceased shale gas exploration temporarily, only last month lifting the ban on hydraulic fracturing.
Then there’s the tempering of expectations in Poland, which initially was considered as the place to be for shale gas E&P in Europe.
The U.S. Geological Survey recently completed an assessment dubbed “The Potential for Technically Recoverable Unconventional Gas and Oil Resources in the Polish-Ukrainian Foredeep, Poland 2012.”
“The Silurian trend across Poland has been regarded as the most prospective thing in all of Europe for unconventional resources,” said USGS assessment team participant and AAPG member Don Gautier. “In our view, there’s essentially nothing there.”
In contrast, an EIA-funded study on world shale gas recoverable resources estimated 187 Tcf of gas for the trend.
At the end of the day, actions are telling – and ExxonMobil exited Poland fairly recently after drilling a couple of non-commercial wells. Meanwhile, some other companies, big and small, continue to operate their licenses. (At press time, Poland announced it would ignore European Parliament objections on shale gas drilling.)
The overriding issue in this whole endeavor centers on the fact that significant new gas discoveries are needed to enhance security for Poland and its neighbors.
The country currently acquires two-thirds of its natural gas via imports of Russian gas from OAO Gazprom, which reportedly links gas prices to oil and charges its customers about three times more than the U.S. price.
Pieces Are In Place
Algeria’s estimated vast oil and gas potential is considered to be underexploited. Adding to the allure for operators and others, pipelines already are in place beneath the Mediterranean to Spain and Italy. These lines link Africa’s largest gas exporter to the European grid.
In contrast to certain other countries, Algeria is eager to utilize tax breaks to encourage shale gas exploration. Parliamentary approval of the proposed tax incentives was nigh at press time.
The country’s relative stability is appealing to operators and investors. Adding to the appeal, the vast stretch of the near-empty desert offers the advantage of fewer drilling risks.
Italian multi-national oil and gas company ENI already has kicked off a program in the Sahara, and Talisman and Shell are said to have plans to drill exploratory wells near-future.
Meanwhile, Algeria and ExxonMobil are conversing.
But the oil business by nature is not fast moving, given the plethora of varied obstacles it encounters on a routine basis. It is anticipated that any commercial unconventional gas production in Algeria is not in the cards until 2020 at the earliest.
It’s likely that a few hundred test wells will be needed to determine if the hydrocarbons can be made to flow out of the source rock and be produced profitably.