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Natural gas flowing from shale rock has brought a boom in gas resources and production in North America, and could make up a third of future US gas resources. Could the same thing happen here with shale riding to the rescue of a post-Maui gas industry asks Lindsay Clark?
In the petroleum industry shale is usually thought of a cap rock which can provide a seal over top of a good oil or gas reservoir. Gas from shale was produced in Pennsylvania as early as the 1820s, almost 30 years before Colonel Drake drilled the first oil gusher there to start the first oil rush in 1859. In New Zealand at the beginning of the 20th Century an oil shale plant was built on the Western Southland coast at Orepuki. The plant produced around 179 litres of oil per tonne from 6350 tonnes of shale between 1899 and 1903 before losses forced it to close. Shale has been around in a small way in the US. As natural gas prices there crept higher in the past decade or two exploration companies began producing gas from ‘unconventional’ sources – typically from ‘tight’ sands, from coal seam gas and very recently from shale. All these ‘unconventional gases’ were really all methane-based forms of natural gas but produced with the latest petroleum technology – particularly the down-hole fracturing (or ‘fraccing’) by high pressure techniques. This can induce tiny fractures up to 100 metres or so from a wellbore in the target rock or coal. Explorers found they could increase flows of gas (or oil) often many times the original flow. The other key development by was in manipulating drill heads to drill down then sideways along the middle of productive reservoirs for a kilometre or more. Thus the well pipe would be exposed to the gas or oil-bearing sands for a much greater length. If a well went straight down contact with a gas or oil reservoir would only be, say, 20 metres to 100 metres. The combination of horizontal drilling and ‘fraccing’ are the key technologies that have made possible the exploitation of shale. As shale explorers fine-tuned their techniques on the Barnett shales near Fort Worth in Texas they threw millions of dollars at expanding gas output. Soon gas output from the leading Barnett shales accelerated from one billion cubic feet a day in 2006 to a heady five billion cubic feet a day by 2009. One of the many other US shales, the Bakken Formation in North Dakota and Montana has proved a good oil producer using the same horizontal drilling and fraccing techniques. The US is blessed with the largest shale resources in the world by far. Other explorers were soon at work on shale plays across the country – even in New York and Pennsylvania states. When a two-yearly official re-assessment of total US future available natural gas supplies was made in 2009, gas resources had grown more than a third to 2074 trillion cubic feet (Tcf) from 1532 Tcf in 2007. The growth was nearly all because a jump in the assessment of potential technically recoverable shale gas. The severe economic downturn has combined with a step up in US gas production to see gas prices fall from over US$12 to under US$5. The gas market turnaround may even see a few LNG import terminals converted to export terminals. Other countries including China, Ukraine, Poland and Australia are now actively looking at shale as a future resource. New Zealand’s potentialCurrently, the attention is on the East Coast Basin between the East Cape and Wairarapa, which has been a frustrating place for petroleum explorers for a century or more. Despite the evidence of some 400 oil and gas seeps over the basin, no commercial petroleum finds have been made there. Early explorers and geologists on the East Coast guessed or knew that the shale rocks they found were the “kitchens” that cooked the gas or oil they kept finding in seeps or down wells. Even recent petroleum exploration on the coast has been looking to find a geological “pantry” – a sandstone or equivalent reservoir where large amounts of petroleum was trapped just ready for a drill well to find. No such luck. The East Coast seems different from Taranaki. So why not forget about looking for the pantry and go straight to the kitchen? After all East Coast shales smell strongly of oil. Streams passing over shale show an oily sheen on the water. Even a lump of shale will go on fire when lit with a match. Extracting oil or gas from the East Coast shales is what Vancouver-based TAG Oil is aiming to do in its three exploration permits – two north of Gisborne and a large permit from Napier to north Wairarapa. Drew Cadenhead, TAG’s chief operating officer is heading the shale search. He says that two key shale layers which generate petroleum underlie much of the East Coast Basin. These are the Waipawa black shale which is widespread, often between 20-60 metres thick and rich in total organic compounds – a key measure for petroleum geologists. Underneath is the Whangai Formation shale which is much thicker (often 200-400 m thick) but not as rich with a lower percentage of total organic compounds. However most of the oil and gas seeps have been proven to originate from the Whangai shale. Cadenhead says the Whangai shale would be a future unconventional reservoir target. Few wells have been drilled across the basin and the usual seismic surveys did not seem work well in the local geology. So TAG decided in place of seismic to drill a number of shallow cheaper surface wells to collect downhole geological data about target areas. “We said, forget geoscience. Let’s just use drilling technology to cut some rocks and find out the age of what’s below,” Cadenhead says. Because TAG is planning to drill into shales there has been a lot of international companies showing interest in investing in the East Coast prospects. “There’s now an almost insatiable thirst for investing in unconventional shales.” When he tells people there is already a high grade sweet light crude oil bubbling to the surface out of the Whangai shales from a 100 year old well at the Waitangi prospect north of Gisborne, they are even more interested. Cadenhead said that when TAG does drill deep wells into the shales the question will not be whether there is oil there, but whether they can extract the oil.
Energy NZ Vol.4 No.5 September-October 2010 |
Some of the petroleum explorers active on the East Coast Basin think there could be a big future in extracting gas and possibly light oil from the great thicknesses of the region’s shale rock.