• Home
• Oil & Gas
• News Article

Arabs in drive to tap unconventional gas

By Nadim Kawach 06 December 2010

Move follows rise in unconventional gas production in US and other countries
Arab countries are set to embark on a drive to tap their massive unconventional gas resources following a sharp rise in production in the United States and development plans in other nations, according to an Arab study.

Gas producers in the Arab world and other countries are already following with strong interest what is commonly described as the "revolution" represented by the breakthrough of unconventional gas, including shale gas, tight gas and coal-bed methane, the first of these forms being the most developed at present in the United States, the Paris-based Arab Oil and Gas magazine said.

"But following these developments is obviously not enough when the spectacular growth in unconventional gas production is having a major impact on international gas balances, as the recent past has illustrated very well," said the magazine, which is published by the Arab Petroleum Research Centre, which acts as an adviser to the Organization of Arab Petroleum Exporting Countries.

"Whereas only a few years ago almost all gas sector specialists were predicting that the decline in US natural gas production would continue and that its gas imports, essentially in the form of liquefied natural gas (LNG), would continue their irrepressible ascent, the US became the world's leading gas producer in 2009 ahead of Russia, while the prospect of its importing huge volumes of gas has been put off for the foreseeable future and the productive life of its natural gas reserves has increased substantially."

The report said Qatar and other gas exporting countries which embarked on major LNG projects several years ago with their eyes on the US market have had to look elsewhere to sell their gas, mainly Europe and Asia.
It said such a development had contributed to driving down world gas prices, on top of the contraction in gas demand that accompanied the global fiscal crisis.

It noted that key gas producers and exporters have studied this phenomenon closely, whether individually or collectively, through the Gas Exporting Countries Forum - GECF, and are in the process of assessing the extent of it.

It said three key elements have been identified in that regard, over and beyond the breakthroughs in the US achieved through a combination of rock-fracturing techniques and intensive horizontal drilling programs.

"The first element is that the fall in gas prices has not resulted in any decline in American natural gas production, which shows that the unconventional gas industry in the US has succeeded in adapting to a sharp decline in prices and that its economic model has become compatible with gas prices that are appreciably lower than up to 2008," the report said.

"The second factor is that the world's leading oil companies, especially ExxonMobil, Royal Dutch Shell, BP and Total, have swooped on American gas producers, which are often small or medium-sized companies and thus find it hard to resist the very tempting financial offers made to them by the majors."

The report said the third factor is that the US is far from having a monopoly on unconventional gas reserves, which are scattered quite widely across the planet. "There is thus no reason why, given that the technical and economic feasibility of developing these resources has been demonstrated, the revolution pioneered in the US should not generate gas shock waves in other regions, even though the situation in the US cannot be transposed everywhere, in particular because of its low population density," AOGM said.

"Russia and several members of both OPEC and the GECF have reached the familiar conclusion that the best form of defense is attack."

The report said those countries have plans to become players in the development of unconventional gas and no longer just "spectators."

Saudi Aramco, the world's largest national oil company, has just revealed at the World Energy Congress in Montreal that the Gulf Kingdom could possess volumes of unconventional gas resources running into hundreds of trillion cubic feet, which would more than double the current estimate of its proven natural gas reserves of 280,000 billion cubic feet, according to the magazine.

It said the state-owned Aramco disclosed it was in talks with foreign companies with a view to obtaining the technology required for developing these resources.

"At the same forum, Algeria also indicated that it intended to intensify unconventional gas exploration activity on its soil," it said.

"Their reactions are interesting and important, since they are not at all in the same situation. Saudi Arabia does not export gas and has no intention of doing so, since its aim is to substitute gas for oil in its domestic energy consumption in order to be able to export more liquids. On the other hand, Algeria is one of the world's leading gas exporters and intends to step up its exports thanks to the start-up of new gaslines and LNG plants in the coming months and years."

© Emirates 24|7 2010