/
Insight

Shale Gas Exploration Finally Becoming Possible

Mon, 02/10/2014 - 15:16

Over the past decade, technological advancements in horizontal drilling and hydraulic fracturing have allowed access to large volumes of shale gas that were previously uneconomical to produce. Shale gas refers to natural gas that is trapped within shale formations. Shales are fine-grained sedimentary rocks that are usually valued as sources of petroleum and natural gas. Conventional gas reservoirs are created when natural gas migrates from an organic-rich source formation into permeable reservoir rock, where it is trapped by an overlying layer of impermeable rock. In contrast, shale gas resources form within the organic-rich shale source rock. The low permeability of the shale prevents the gas from migrating to more permeable reservoir rocks.

Natural gas is the cleanest burning fossil fuel. The combustion of natural gas emits significantly lower levels of carbon dioxide and sulfur dioxide than does the combustion of coal or oil. When used in efficient combined cycle power plants, natural gas combustion can emit less than half as much CO2 as coal combustion per unit of electricity output. Several scientists believe that methane and other emissions from shale production are greater than commonly thought. The majority of experts, however, find the emissions associated with shale gas-fueled electric power generation to be significantly lower than those emitted when using coal or oil as a fuel source.

The climate impact advantage is well established for conventional natural gas, but it has been questioned for shale gas. The fracturing of wells requires large amounts of water. But if mismanaged, hydraulic fracturing fluid, which may contain hazardous chemicals, can be released through spills, leaks, faulty well constructions, or other exposure pathways. Fracturing also produces large amounts of wastewater, which may contain dissolved chemicals and other contaminants that would require treatment before disposal or reuse. Because of the quantities of water used and the complexities inherent in treating some of the wastewater components, treatment and disposal are vital but challenging issues.

Technological developments resulted in an unprecedented production of shale gas in the US, which offset declines in production of conventional gas. Considering recent shale gas discoveries, estimated natural gas reserves in the US were 35% higher in 2008 than in 2006. The number of unconventional natural gas wells in the US rose from 18,485 in 2004 to 25,145 in 2007, a figure that is expected to continue increasing through at least 2020. The economic success of the shale gas industry in the US has sparked of the development of its Canadian counterpart and spurred interest in Europe, Asia and Australia.

The rapid expansion of shale gas production in the US has created a large number of jobs and reduced energy bills, not only for natural gas, but for electricity in general. Another important benefit of recent shale gas production has been the weakening of the historical link between natural gas prices and volatile international crude oil prices. In 2011, 34% of all natural gas produced in the US was shale gas, which could rise to 50% of total natural gas production by 2040.

In Mexico, the demand for natural gas increased consistently during the 2000-2011 period, with an average annual growth rate of 5.7%. This trend is the result of affordable gas and better efficiency in plants that use gas compared to those that use oil-based fuels. If this situation is prolonged, imports will increase alongside national demand because domestic investments are focused primarily on oil which is currently more profitable than natural gas.

Importing natural gas makes sense from an economic perspective, but also because Mexican natural gas production has experienced turbulence in recent years. Between 2010 and 2012, PEMEX issued several critical alerts, linked to the availability of this resource. The expansion of the Los Ramones pipeline further highlights the industry’s intentions to import natural gas from the US. Currently, PEMEX imports 1,300Mcf/d and this number could reach 3,400Mcf/d by 2015 once this project is complete.

Mexico has rich shale gas resources that are still being explored. The Energy Information Administration ranks Mexico as the fourth country with the most shale gas reserves, with 681Tcf. This is 11 times the total gas reserves that were previously estimated formerly quantified. Mexico’s shale gas reserves are located in the states of Chihuahua, Coahuila, Nuevo Leon, Tamaulipas and Veracruz. PEMEX began shale gas exploration in Coahuila in 2010. Gas production effectively began a year after. However, the natural gas sector will not be boosted overnight as legal, economic and technical aspects are still undergoing a thorough assessment.

The 2013-2027 National Energy Strategy states that nonconventional hydrocarbons, a category that includes shale gas, will see their exploitation adapted to prevalent legal and economic conditions. Nonetheless, investing in shale gas production would provide the country the opportunity to become a natural gas exporter once again.