The Learning Curve of the Shale Rush

Tue, 01/22/2013 - 11:45

Even though the existence of hydrocarbons in shale was discovered at approximately the same time as conventional deposits, e†ective technologies needed to extract them have only been developed quite recently. Hydraulic fracturing – or fracking as it is informally called – has become a hot topic in the US. Its use has led to a late boom of both shale oil and gas exploitation north of the border, making these newly developed deposits a central focus of the US’s recent energy policy. NetBrains Managing Partner, David González Sánchez, believes that even though this technology should be the next step in helping Mexico to recover its previous production levels provided by giant fields like Cantarell, the country should not rush into it

“Cantarell is a 37 year-old reservoir that is still producing at an astonishing rate – even better than many other reservoirs in the world,” González Sánchez says. “Nevertheless, all things in life have an ending, and Cantarell’s is close. In order to compensate for the losses in production that will come with Cantarell’s demise, we have to start using new technologies to extract unconventional resources, such as horizontal drilling and multi-fracturing.”

As the country starts facing heavy and di·cult oil challenges, and the growing necessity of exploiting these unconventional hydrocarbon resources, technologies such as fracking will keep gaining traction in the market. “Unconventional fields have several characteristics that make them unique,” González Sánchez explains. “But companies working on these fields should take their specific challenges into account, instead of just projecting their permeability, porosity, and other characteristics through other similar fields.” The philosophy of conducting specific analysis for each unconventional field is arguably no di†erent from what is required for conventional exploration projects. The di†erence might come from the pressure that Pemex and other companies feel to participate in the shale boom.

Jordy Herrera, former Minister of Energy, was adamant about the fact that Mexico should take advantage of this opportunity to become a net exporter of gas, instead of importer, as the trade balance currently holds. Indeed, a large portion of the Conacyt-Sener-Hydrocarbons fund (US$245.34 million or MX$3.130 billion) was allocated to shale development in the final days of the previous government. Political pressure of producing from shale formations has led Pemex to explore the possibilities of making the shale gas business profitable enough to develop and exploit. 

The urgency of developing this market could tempt the government to try to rush through the steep learning curve that is needed to undertake such projects successfully. “Simply using standard approximations for sand grain sizes and the type of propellant needed could result in a negative outcome. With gas prices at current levels, ine·cient production might eliminate any chance of profitability,” González Sánchez points out. “In-depth analysis is needed first to sort out which type of grain size or propellant is needed for each specific shale gas well – mineralogy and the rock’s physical and chemical characteristics have to be defined first through geological studies for improved production.”

González Sánchez’s thinking, though, takes him to the other side of the spectrum: “With gas prices as they stand, now is not the time for exploring shale gas. Even if Pemex or Mexico needs it, shale gas should not be a priority right now.” A whole di†erent argument is made, though, for shale oil. “Pemex should focus on unconventional oil reservoirs, and apply new technologies to exploit them, before entering into the shale gas rush,” he believes.

NetBrains has evolved from doing studies and characterizations for the Pemex at the beginning of their partnership, to help it in maintenance tasks: re-fracturing and cleaning all drill cuttings for Pemex to be more e†ective. Today, the specialized consulting company is exploring di†erent solutions applied in the US by big shale players in the development and exploitation of the unconventional resource. “We are trying to show Pemex what has been done at Eagle Ford, which is just across the border, and lure them into a learning opportunity by sharing equipment that is already in place,” González Sánchez explains. If Pemex really wants to dig deeper into shale gas production, opportunities to go through the learning curve with experienced partners might be the best way to go.