Vinodkumar Roghothamarao from Contax Capex on the potential for shale gas exploitation in the MENA region.
Across the globe, production of unconventional gas has risen substantially in recent years. In the United States, unconventional natural gas now makes up about 60% of marketed production.
Meanwhile, coal bed methane (CBM) development is growing in Australia, whilst projects in China, India and Indonesia are in the early stages of development.
In the Middle East and in Eastern Europe, conventional gas is cheap to produce, whereas in North America the rapid development of shale gas has been driven by a fall in unit costs as technology and experience have overcome geological and other challenges.
Australia produces small amounts of CBM and is set to be the first CBM-based LNG exporter. Exploration of unconventional resources has started in Europe with a focus primarily on shale gas. Even though Poland is leading the race, there are other players like Germany, Spain, UK and Ukraine.
Figure 1 shows the changing dynamics in the source of gas supplies in the US from 2000 to 2020, and from this data, it is clear that tight gas and shale gas will play an increasing pivotal role in the US in the coming years at the expense of conventional gas.
Unconventional gas sources are playing a major role in various countries even outside of the US (Figure 2, overleaf). Interestingly, unconventional gas sources represent the majority of all gas produced in North America, the Former Soviet Union, China, India, Latin America, OECD– Pacific, and Western Europe. The Middle East and North Africa is the exception.
In the Middle East, a trend towards unconventional gas is emerging, mainly powered by burgeoning domestic demand, which partly protects regional gas projects from the unfavourable economics.
There is significant potential for producing tight gas in several Middle East and North African countries, such as Saudi Arabia, Oman, Jordan, Algeria and Tunisia. Development of resources in these countries will depend on the level of each country’s conventional gas output, the need for additional resources to meet demand and relative production costs.
Oman is taking strides in unconventional gas development, and through its Block 61 project with BP, it may host one of the most ambitious tight gas drilling projects in the world.
Furthermore, Saudi Aramco has signalled its intentions regarding shale fracking by entering advanced talks to take a $2.2 billion, 30% stake in Frac Tec International, an American firm which has been a major player in the US shale revolution.
Aramco aims to be extracting its first shale by 2020, and is current conducting reconnaissance for potential shale plays.
While Aramco prefers to go it alone in shale, other national oil companies are unsure whether they have – or can acquire – the expertise needed to follow suit, creating opportunities for major players from North America.
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Last month, the first research centre in Saudi Arabia that focuses on the research and development of new technologies that will explore and unlock the potential of the Kingdom’s unconventional resources such as shale oil and tight gas has been opened by Baker Hughes in Dhahran Techno Valley.
The above examples just reiterate the efforts taken by the Middle Eastern countries in the development of unconventional gas projects and technologies.
In the broader MENA region, unconventional energy resources are found in Egypt, Iraq, Jordan, Syria and Algeria. The table (Table 1) below shows the location of tight gas fields in the Middle East with their pertinent applied technologies.
Contax Partners has conducted significant research into the development efforts for unconventional gas projects across the globe, the challenges in enforcement and also the companies in the unconventional gas sector.
Based on the initial analysis of the various stakeholders involved in unconventional gas projects, Contax Partners realises that inorganic growth is the way forward for stakeholders with projects in the unconventional gas space, and especially outside the USA.
Furthermore, there is an obvious trend as the stakeholders that have entered into the unconventional gas arena later have often grown their positions through mergers and acquisitions.
Contax Partners analysis reveals that although extraction efforts are in their nascent stage, India and China could become more self-sufficient in the natural gas market if they pursued unconventional gas sources in as aggressive a manner as Australia and America.
American technological advances in shale gas extraction could serve as a model for increased shale gas extraction in Asian and Middle Eastern nations.
While Australia is a leading producer and exporter of unconventional gas, and stands to greatly increase its exports over the next decade, the country is unlikely to maximize its potential unless the cost and logistical complexities for planned ventures are remedied.
Finally, approaching tight gas will require paradigm shift of what we are doing today, especially in the MENA region.
It requires an integral approach of all the technology available to unlock this big resource for the future of the region, and saving oil for exporting, for the petrochemical industry, and for the generation of hard currency.
As such, it is worthwhile to explore what can be done to prepare for above mentioned challenges and opportunities in unconventional gas development across the globe, and whether the Middle East can emulate the best of either the US, Asia or Australia or a mix of all the above.
