It’s said that the only constant is change.
This is a given in the oil business.
Look at the domestic shale gas plays, which took off like a rocket once they became economically viable, principally via the combo of hydraulic fracturing and horizontal drilling.
Of course, it didn’t hurt that natural gas prices soared into the double digits, topping $13/mcf in 2008 as shale gas was morphing from boomlet to boom.
Just when you least expect it, the unexpected happens.
Prices plunged into $3 territory a year later, and have nudged upward only a tad since that time.
Operators in the United States essentially created a new kind of recession by producing huge volumes of shale gas. The resulting oversupply played a key role in dampening prices.
They quickly switched gears, so to speak, and the big story today in the United States is shale oil along with liquids.
It’s the money, honey.
With crude oil prices looking secure in the $90 range – for the moment – liquids are so in, and dry gas looks to be so yesterday.
Still, it depends on where you’re looking.
Opportunities for gas E&P exist in the international arena, given that the North American shale gas bonanza failed to materialize in other countries. Countries such as Poland and China depend heavily on gas imports, which entail both a monetary and a political price.
Many countries are eager to duplicate the U.S. shale “revolution.” They are licensing acreage to a range of companies, including domestic independents, utilities, NOCs and the majors, according to a study conducted by Wood Mackenzie’s Unconventional Play Service.
With North American unconventional gas plays becoming evermore unprofitable, operators and investors have been forced to look at the alternative unconventional opportunities of international shale gas and North American tight oil.
“There are some tight gas and shale gas plays that are still profitable,” said Robert Clarke, manager of Wood Mackenzie’s Unconventional Play Service in Houston. “But on average, tight oil is the only one generating value.
“When we began our study,” he noted, “we had noticed some of the largest players taking a more diversified approach with their unconventional portfolios.”
Clarke summarized the leading pros and cons of the developing trend from a commercial vantage point:
Clarke emphasized that for many operators and investors, the portfolio benefits and price risks in tight oil plays compete on a level playing field with the low entry costs and unproven geology of international gas.
Well, you ask, who are these people?
Certain entities chase certain opportunities, according to Clarke. They are:
He emphasized that the metrics applied in the study were all on a Boe basis, in order to look at the relative economic strength of gas plays vis-á-vis oil plays.
“We expect competition to intensify in the North American tight oil market,” Clarke said, “with more cash-rich oil companies looking to acquire acreage in producing plays.
“In international gas plays, larger companies will seek sizeable positions in the most promising shale gas assets,” he added, “with supply players controlling access where they can.”
Robert Clarke, manager of Wood Mackenzie’s Unconventional Play Service in Houston, will present the paper “Unconventional Resources Around the World: Company Strategies for Dynamic Global Markets,” at 8:05 a.m. Wednesday, May 22, at the AAPG Annual Convention and Exhibition in Pittsburgh.
Clarke’s talk is part of the EMD session on “Shale and Tight Oil Plays Around the Globe.”