 Welcome to Profit Oil, the section of Oil & Gas Middle East dedicated to helping oil & gas professionals invest in the industry they know best. Dan Dowding, Senior Executive Officer for Middle East & Asia at Killik & Co, a Private Client Stockbroker and Wealth Management firm, examines the prospects for shale exploitation.
All over the world, nations have begun to realise the prospective value of their domestic shale gas reserves, and as a result, a new group of gas producers look likely to emerge who could just threaten the old oligopoly.
By comparison to the 1950s, when nuclear scientists argued that the answer to the world’s energy needs was atomic power, oil and gas producers believe that this new resource could bring abundance of low cost energy. Not only this, but it could also free certain nations from a reliance on imports, bringing with it all important energy independence.
As readers of this publication will understand more than most, it is the on-going development of drilling technology and the hydraulic fracturing process, the procedure of initiating or propagating a fracture in a rock by means of a pressurized fluid (a combination of water and chemicals), in order to release either oil or natural gas, that is enabling producers to unlock the gas reserves which were previously not commercially viable.
Its is here that the US seems to currently have the advantage, deep and horizontal drilling, fracking, a long established Oil & Gas service industry, a network of pipelines, and large supply, which all contrive to the production of cheap energy.
For investors looking to play the potential shale gas boom, there are obvious candidates such as the US based Chesapeake Energy who own resources in the rich shale gas fields of Barnett, Haynesville, Marcellus and Utica.
Just the Utica region alone is estimated to hold 25 billion barrels of oil and gas, almost as much as the entire proved reserves remaining in the North Sea, though buyer beware, investors in Chesapeake Energy have suffered somewhat of a roller coaster ride over the last two years.
More indirect ways of playing shale are perhaps through the majors such as Exxon (XTO Energy acquisition) and BHP Billiton (Petrohawk acquisition).
The process of hydraulic fracturing does not come without its critics however, and has been linked to a variety of environmental concerns including the contamination of groundwater supplies, air pollution and seismic activity, although there has so far been little consensus on any of these points to date.
This being the case, shale and the development of home grown energy has the potential change the geopolitical landscape as well as impacting oil companies and related industries investment decisions. Billions of dollars have been invested in North American shale gas resource, a trend that it likely to continue world-wide.
