Techniques now being used in the US Lower 48 States to prolong the commerciality of unconventionals hydrocarbon production could work in Europe, according to Wood Mackenzie analysts.
Moreover, techniques used in late-life, so-called Phase 3.0 production, “could become the first success phase of international unconventional projects, instead of the last”, including in the UK.
WoodMac is specifically pointing to so-called third phase activity, or 3.0. In the US, 3.0 style projects have the combined potential to produce over 1million barrels of oil equivalent per day by the end of 2020.
“In the last decade, the unconventional onshore sector in the US has already gone through two distinct cycles and is now transitioning into its third phase,” says Robert Clarke, WoodMac’s head of unconventional upstream research in Houston.
“The first chapter was built around a large group of highly productive shale gas assets and was defined largely by production growth.
“The second wave was defined by a smaller grouping of high margin tight oil plays.”
Now independent producers are leading the shift to the latest, quickly unfolding phase, concentrating on brownfield exploration essentially re-evaluating once marginal assets that were previously considered to be insufficiently permeable for commercial drilling.
“In this current phase the most modern aspects of the two techniques that define unconventional projects – long lateral horizontal drilling and isolated multi-stage hydraulic fracturing – are being used to exploit all types of rock volumes in mature basins,” says Clarke.
WoodMac’s latest research into unconventionals highlights that a wider array of formations than ever before are being targeted: “The shift towards using unconventional field techniques on virtually any type of stratigraphy is presenting a wider unconventional opportunity set than early shale explorers ever anticipated.”
And it is this shift in the attitude of what characterises an unconventional play that has implications outside of the US where unconventional developments haven’t really progressed.
“The emergence of the unconventional 3.0 phase of development in the US could provide the bridge for international unconventional projects to be successful,” says Clarke.
“To date, operators have struggled to build unconventional 1.0 and 2.0 projects outside of North America.
“However, the development of international plays does not need to follow the same sequence of phases as has been successful in the US.
“We hypothesise that a functioning unconventional sector can be created in numerous countries by utilising the same operational mentality and field development techniques that are being leveraged in the current ‘3.0’ phase of US developments.”
He adds that countries possessing suitable assets must hold mature fields with redevelopment potential, be receptive to hydraulic fracturing, and have proven their ability to let operators deploy the right equipment.
This could include the likes of the UK and Poland.
“If success criteria are revised to be more aligned with the current wave of US 3.0 activity, unconventional projects abroad could advance.
“A wider-scale translation of unconventional 3.0 on to European assets in particular has tremendous potential for niche developments to accelerate.”
Clarke adds: “Europe is one of the best areas outside of the US for this to occur.”
He points out that horizontal drilling and hydraulic fracturing are already being used to unlock extra reserves in Ukraine’s Dnieper Donets Basin, as one example.
Additionally, shallower vertical wells in 3.0-style niche plays could be easier to permit and source equipment for.
Small scale developments could face less public opposition as well,” Clarke suggests.
Using its proprietary Upstream Data Tool, WoodMac has screened European countries for characteristics to support a new style of unconventional projects.
Clarke: “We filtered our dataset for countries in Europe which share the same traits that define many of the unconventional 3.0 opportunities in the US: where fracturing is legal; onshore fields are more than 70% depleted; known porosity is less than 20%; known permeability is less than 50 millidarcies and formation depth is less than 3,000m (9,842 ft).
“We found assets in Hungary, Poland, Romania and Turkey.”
So what would be different about these assets?
“For companies seeking unconventional exposure in Europe, their management teams could have new expectations for what defines a successful project,” Clarke claims.
“Their asset teams may be able to successfully pass through revised project gateways.
“Regulators could more easily adapt to smaller scale projects and when the opportunity set of potential assets is expanded beyond blanket shale beds, typical in the first two phases of activity, the chance of commercial success should naturally increase.”
